China runs its product exports under a dual regime — a license plus a quota — with the Ministry of Commerce allocating quotas and customs clearing the cargoes. The first two 2026 batches totaled roughly 31.9 million tonnes spread across seven entities, and Sinopec plus CNPC together hold over 70%. The third batch is normally released by end-Q3, so the window is open right now.

The mechanism shapes Asian product pricing more indirectly but no less concretely than it appears. The domestic diesel crack reached CNY 1,225/t in August, a five-year high for the period, while overseas diesel cracks ran as wide as $150–160/bbl. Quota holders capture that cross-market gap directly and export willingly, pulling domestic distillate supply offline and removing upward pressure from Asian spot premia.

For our re-export and bonded bunker desk, the number to watch is not the quota itself but which cargo's landed cost it reshapes. With Middle East and Russian diesel exports constrained by geopolitics and US stocks pinned at lows, the pace of these 31.9 million tonnes becomes the marginal variable in Asian distillate supply. Smooth, fast allocation caps Northeast Asian diesel landed prices; slow allocation lets regional premia rebuild.

The US side reinforces this. The EIA's earlier low-stock warning is playing out — East Coast diesel inventories sit near 19.3 million barrels, a historically tight band, and refinery runs approach 98%. That means even with higher Chinese exports, the global distillate gap will not close near term, and the export margin has structural support. Treat that as a base assumption, not a transient swing, when running the arbitrage.