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China Directs Refiners to Maintain High Output Amid Mideast 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 that threaten crude oil shipments, according to a Bloomberg News report.
Safeguarding Domestic Supply
The directive was issued to at least two major refineries, which were asked to sustain or even increase their processing rates, Bloomberg reported Saturday, citing people familiar with the matter. This instruction comes despite elevated domestic inventories of gasoline and diesel and a broader structural slowdown in China's fuel demand.
Beijing is taking precautionary measures as renewed hostilities raise the risk of disruptions to tanker traffic through the Strait of Hormuz, a critical chokepoint through which approximately one-fifth of global oil consumption passes. The move underscores the government's focus on shoring up fuel availability ahead of potential supply interruptions.
AdExport Policy and Market Impact
Initially, China had curbed exports of gasoline, diesel, and jet fuel when the conflict began, but later eased these restrictions by issuing additional export quotas. However, the report indicates that Beijing will not revise the export quotas for July, signaling that the priority has shifted back to ensuring the domestic market is well-supplied.
The policy could have a significant impact on regional energy markets. An increase in refinery utilization in China is expected to add further downward pressure on already weak Asian refining margins. According to the report, the spread between regional gasoline prices and Dubai crude has already fallen to its lowest point since late March.