China's fuel oil exports fell 3.4% month on month to 1.22 million mt in October, and surged 164.7% year on year, General Administration of Customs released Dec. 1 showed.

The country's net fuel oil exports rose to 625,000 mt in October from 551,000 mt in September, the data showed. China's fuel oil exports comprise low sulfur marine fuel sold for bonded bunkering; exports in the form of cargoes are not permitted.

Over January-October, fuel oil exports totaled 11.94 million mt, up 64.9% year on year, while fuel oil imports fell 10.4% over the same period to 10.64 million mt, the customs data showed.

China imported 598,000 mt of fuel oil in October, down 16.4% on year.

The country's refineries have significantly expanded their production capacity of low sulfur fuel oil for bonded bunkering since a tax rebate became effective in February amid a push to develop a marine fuel hub.

However, LSFO sales have slowed due to an export quota that limits the volume of tax-free domestically produced barrels that can be sold for bonded bunkering at Chinese ports.

China's Ministry of Commerce issued a 10 million mt fuel oil export quota to five oil companies in late April. There has been no additional quotas issued since.

While most refiners have not reached their quota limit for the year, they have capped run rates due to poor margins for distillates, resulting in less production of fuel oil, market sources said.

"They may not be willing to do export tax rebates for a small amount of fuel oil as domestic prices for asphalt may be higher," a supplier said.