China Halts Fuel Exports Until Further Notice, Pushing Brent Back Above $100

Oil climbed back above $100 a barrel on Thursday after Reuters reported that Chinese refiners had suspended exports of oil products to regions beyond Hong Kong and Macau until further notice from Beijing, citing four people briefed on the matter. State major PetroChina cancelled a handful of gasoline and jet fuel shipments planned for October, and no export permits were issued as China's October 1 to 7 holiday began. Bloomberg separately reported that Sinopec Group and Sinochem had cancelled some October cargoes. The reports rest on unnamed sources, Beijing has not confirmed them, and CNBC said it could not independently verify the Reuters account.

December Brent, now the front-month contract, traded at $100.09, up 2.1%, in the European morning and reached $101.06, up $3.02 or 3%, by mid-afternoon in Europe, according to Reuters and RTE. U.S. West Texas Intermediate rose to about $92. Social-media market feeds put Brent's intraday gain at 4.6% to 5%, larger than the roughly 2% to 3% moves cited in wire reports, so the size of the daily gain depends on the contract and timestamp quoted.

The move matters because fuel, not crude, is where supply is tightest. Middle East crude flows were reported to be recovering after Saudi Arabia resumed tanker loadings at Yanbu on its restarted East-West Pipeline, while Iran keeps the Strait of Hormuz blocked. Refined products have lagged that recovery, and Asian diesel refining margins rebounded to around $75 a barrel, the highest in a week. China had been a growing supplier of products, with August exports up 12.7% year on year to 6.01 million tons, according to OilPrice.com, and Russia has extended its own diesel export ban through October 31. UBS analyst Giovanni Staunovo said the Chinese move "suggests concerns about domestic product availability."

What to watch: whether Beijing issues export permits after the holiday week ends on October 7, which the sources said could depend on domestic inventories and refinery output; whether the Trump administration, which said this week it is still considering a diesel export ban, acts on it; and whether refining margins keep widening. Brent rose about 14% in September, so a sustained Chinese pause would add to an already steep run in fuel costs for airlines, shippers and other heavy fuel users.