China is set to export close to 400,000 tonnes of diesel in April, trade sources said, a second straight month exports could hit that level on the back of sluggish domestic demand and high fuel stocks.

April's exports will be 60 per cent higher than February's. But exports may ease from May onwards as state refiners scale back crude throughputs in the coming months and also as some plants start maintenance-related stoppages. China controls exports of the fuel by issuing quotas to ensure adequate domestic supply.

The government can grant higher quotas depending on requirements of the state-owned refiners. The increase in diesel exports has already caused the oil product's Asian margin to dip to its worst quarter in more than two years, with March the worst performing of the three months even with supply cut from the start of refinery maintenance season. "Main commercial fuel storages are all quite full now because of high crude runs over the past months. No one wants to buy diesel right now," said a Beijing-based oil product trader.

Top Asia refiner Sinopec and the country's second-largest refiner PetroChina have almost used up their diesel export quota for the first half of this year, the sources said. But they have just received their second batch of quota from the government to continue their exports, the sources said. "Yes it's almost used up, and mostly because it's allocated to individual refineries and products. There are some imbalances right now, but the second allocation has just come out," said a source close to a Chinese refiner. The refiners won't firm up their May export programs until mid-April.

China exported 254,871 tonnes of light diesel fuel and imported 45,736 tonnes in February, leaving net exports at nearly 210,000 tonnes, according to customs data. Net diesel exports in January was nearly 310,000 tonnes. Weak demand for the industrial fuel and capacity additions are contributing to higher exports from the refiners, industry sources said. The world's second-largest oil consumer became a net diesel exporter in mid-2012 as the weakest pace of economic growth in 13 years pared annual demand growth for the fuel to less than 2 per cent last year. That was one of the lowest annual growth rates on record, according to energy consultancy Wood Mackenzie. CRUDE RUNS CUT Sinopec will cut its crude runs in the second quarter to 58.3 million tonnes from 59.8 million tonnes it originally planned due to high stocks, energy consultancy ICIS C1 said this week.

Sinopec's Qilu refinery has shut down this year its 800,000 tonnes per year ethylene complex and a 80,000 barrels-per-day crude distillation unit for about 35 days' maintenance. Sinopec also shut down in April its 100,000 bpd Shijiazhuang refinery for 35-day maintenance. PetroChina too shut down a 90,000 bpd CDU at its largest Dalian refinery from late March for 40-day maintenance. "PetroChina won't seek high crude runs and instead pay more attention to profitability and environmental protection," said a PetroChina refinery official, adding that his refinery remained loss-making over the past months. Chinese refineries processed close to 10 million bpd in the first two months of the year, a level just a touch off the record rate of 10.15 million bpd in December, as newly started refining facilities ran at high rates. The run rates across January and February helped to lift China's refined fuel stocks for the fifth and sixth consecutive months as output outpaced domestic demand, forcing state refiners to ship more refined products overseas.

China's annual industrial output growth eased to 9.9 per cent in the first two months from a year ago, below market forecasts and adding to signs of uneven recovery in the world's second- biggest economy after its slowest year of growth since 1999.