China Orders Refiners to Maintain High Output Amid Persian Gulf Tensions

China has instructed some of its largest refiners to maintain high fuel production as renewed conflict between the United States and Iran raises the risk of crude oil shipment disruptions through the Persian Gulf, according to a weekend report from Bloomberg News. The directive highlights Beijing's focus on securing domestic energy supplies amid escalating geopolitical tensions in a critical global oil transit corridor.

Directive Amid High Inventories

Citing sources familiar with the matter, the report stated that at least two major refineries were asked to maintain or increase their processing rates. This order was issued despite the country having elevated inventories of gasoline and diesel and facing a structural slowdown in domestic fuel demand.

Beijing is reportedly not planning to revise its fuel export quotas for July. This indicates that the immediate priority is to ensure the domestic market is well-supplied rather than altering its export policy in response to the heightened risk.

Impact on Regional Markets

The move is expected to have a significant impact on regional energy markets. Higher refinery utilization in China, the world's largest crude importer, will likely add to fuel supplies across Asia, putting further pressure on already weak refining margins.

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According to the report, the spread between regional gasoline prices and Dubai crude has already fallen to its lowest level since late March. The increased output from China could exacerbate this trend, squeezing profitability for refiners across the region.

Focus on Energy Security

This policy underscores China's long-standing concern for energy security, particularly with tensions centered on the Strait of Hormuz, through which roughly a fifth of global oil consumption passes. The concerns were reignited by recent hostilities and Washington's decision to revoke a waiver that permitted the sale of Iranian crude.

China had initially curbed fuel exports when the conflict first began to protect its domestic reserves. While those restrictions were later eased with new export quotas, the latest directive suggests Beijing is preparing for the possibility of a prolonged period of geopolitical instability affecting its energy imports.