Key Takeaways:
Chinese state refiners have slashed oil throughput by more than one million barrels per day since the outbreak of the Iran war, a significant pullback from the world's top crude importer that signals weakened demand and could tighten domestic fuel supplies.
"The drop in output by oil majors Sinopec, PetroChina, CNOOC and Sinochem, which account for about 60% of China's refining capacity, has weakened crude demand from the world's top importer," according to a Reuters report citing analysts and market sources.
The reduction in processing began in March as surging oil prices and weak domestic demand caused refining margins to collapse. According to data from Chinese research firm Horizon Insights, margins for state refiners fell to about 3,200 yuan ($470.71) per metric ton in late April. Consultancy Energy Aspects estimates that state refiners are processing 8.4 million barrels per day (bpd) of crude in May, down from a pre-war level of about 10 million bpd.
The cuts reflect a dual challenge for Beijing's oil giants: securing crude shipments amid geopolitical turmoil and processing it profitably as domestic consumption flags. In response, Sinopec, the world's largest refiner, brought forward maintenance at two facilities and sharply reduced crude loadings from Saudi Arabia for May and June. This collective action contributed to China's total crude throughput falling to 13.3 million bpd in April, its lowest since August 2022.
Despite the production cuts, China's domestic fuel inventories have been rising. Beijing imposed curbs on fuel exports in mid-March, causing stocks of diesel and gasoline to build above 2025 average levels, according to consultancy OilChem. Customs data showed that April exports of diesel, gasoline, and jet fuel totaled just 1.24 million metric tons, the lowest volume since February 2015. The export restrictions are expected to remain in place, further pressuring the domestic market.
This article is for informational purposes only and does not constitute investment advice.
