China Directs Refiners to Maintain High Output Amid Iran-US Tensions

China has directed some of its largest oil refiners to maintain high levels of fuel production, a move aimed at ensuring domestic energy security amid escalating geopolitical tensions between the United States and Iran, according to a Bloomberg News report.

The directive underscores Beijing's proactive stance in mitigating risks to its energy supply chain as conflict threatens a critical global oil transit route.

Safeguarding Domestic Supply

Citing people familiar with the matter, Bloomberg reported on Saturday that at least two major refineries have been asked to sustain or increase their processing rates. This instruction comes despite already elevated domestic inventories of gasoline and diesel and a broader slowdown in China's fuel demand, signaling that national security concerns are currently overriding market fundamentals.

The move follows Washington's recent decision to revoke a waiver that permitted the sale of Iranian crude, heightening concerns over potential interruptions to oil imports. Beijing will reportedly not revise its July fuel export quotas, reinforcing its focus on shoring up domestic availability.

Impact on Asian Markets

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The policy could exert further pressure on already weak Asian refining margins. Increased output from China, the world's largest crude importer, is expected to add to a regional fuel surplus.

According to the report, the spread between regional gasoline prices and Dubai crude has already fallen to its lowest point since late March. This indicates that the profitability for refiners in the region is being squeezed by the combination of high supply and tepid demand.

Geopolitical Context

China has been closely monitoring the security situation around the Strait of Hormuz, a vital chokepoint through which approximately one-fifth of global oil consumption passes. The country had initially restricted fuel exports when the conflict began to ensure domestic stockpiles were adequate.

While those restrictions were later eased with the issuance of additional export quotas, the latest directive suggests Beijing is preparing for a potentially prolonged period of heightened geopolitical risk in the Middle East.