From Bloomberg:

China’s love of cars and the gasoline that runs them is exacerbating an oversupply in another fuel decried by refiners across Asia, according to Bank of China International.

While refineries in the world’s biggest auto market process more oil to feed demand for motor fuel, they also end up producing diesel, which is being used less because of shrinking Chinese industrial activity, Xiao Fu, head of commodity markets strategy at the bank, said in an interview. Amid this “product mismatch,” excess gasoil is being shipped overseas, flooding regional markets and affecting profit margins, according to Fu.

Unlike China’s bloated coal and steel industries, refineries have so far been spared from President Xi Jinping’s drive to cut industrial overcapacity, with oil processing rising to a record last year and capacity seen expanding in coming years. That’s being driven by demand for gasoline on surging vehicle sales, which the state-backed China Association of Automobile Manufacturers predicts will gain about 6 percent this year, faster than the 4.7 percent pace in 2015.

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