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China Directs Refiners to Maintain High Fuel Output Amid Iran Tensions, Report Says
Summary
China has reportedly told major refiners to sustain high fuel production to ensure domestic supply security as rising U.S.-Iran tensions threaten crude shipments through the Persian Gulf. The move is expected to pressure Asian refining margins.
China has instructed some of its largest refiners to maintain high levels of fuel production to safeguard domestic energy security as renewed conflict between Iran and the United States threatens crude oil shipments, according to a Bloomberg News report. The directive highlights Beijing's preparations for potential supply disruptions in the strategically vital Persian Gulf.
Directive Aims to Shore Up Supply
Citing people familiar with the matter, the report stated that at least two major refineries have been asked to sustain or even increase their processing rates. This order comes despite elevated domestic inventories of gasoline and diesel and a broader slowdown in China's fuel demand.
The primary goal is to ensure a stable and adequate supply of refined products for the domestic market. The move follows Washington's decision to revoke a waiver that had permitted the sale of Iranian crude, escalating concerns over the availability of imports.
Market and Policy Implications
The directive is expected to add further pressure to already weak Asian refining margins. According to the report, the spread between regional gasoline prices and Dubai crude has already fallen to its lowest level since late March.
AdBeijing will reportedly not revise its July fuel export quotas, underscoring a policy focus on shoring up domestic reserves. China had initially restricted fuel exports when the conflict began before later easing those curbs by issuing additional quotas.
Geopolitical Context
As the world's largest crude oil importer, China is particularly vulnerable to instability in the Middle East. The country is closely monitoring the security situation around the Strait of Hormuz, a critical chokepoint through which roughly one-fifth of global oil consumption passes.
The latest measures suggest that Beijing is preparing for the possibility of a prolonged period of heightened geopolitical risk, even as its own domestic fuel demand remains subdued.