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OUR TAKE: Negative. Just one day after we published our latest refining industry note, in which we argue that the Chinese government would boost the export quota for the remainder of this year given the robust international product margins as well as rising domestic product inventories, yesterday China’s Ministry of Commerce issued 4.5MM tons of additional refined fuel export quotas in an effort to reduce swelling product inventory caused by COVID lockdowns. If fully used by 6/30, the extra quotas would translate into 1.5-1.6 million barrels per day of incremental exports, which we estimate will have $5-$10/bbl of negative impact on refining margin. Perhaps more importantly, this policy move signified that the Chinese government may shift the priority back to the economy and suggests 2H export quota could be much higher than previous market expectations and the government's plan.
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