Chinese authorities have ordered private refiners to maintain high levels of gasoline and diesel supply, even at a loss, or risk their crude import quotas slashed if they reduce run rates, anonymous sources with knowledge of the matter told Bloomberg on Thursday.
As China looks to ensure its domestic fuel supply amid the oil supply shock, officials at the National Development and Reform Commission (NDRC), the country’s main planning body, have directed executives at the private refiners to keep their gasoline and diesel production at least at the 2025 levels. This should be done at any economic cost to the refiners, the authorities told the executives at a meeting this week, according to Bloomberg’s sources.
If private refiners move to cut processing rates to preserve margins amid soaring crude prices, they would see their import quotas – handed out by the government in quarterly or semi-annual installments – reduced in the coming years, the officials warned.
Until recently, most private refiners made profits because they imported cheap and sanctioned Iranian, Russian, and Venezuelan crude. But as the U.S. took control of Venezuela’s oil sales and issued waivers on the sales of Iranian and Russian barrels already loaded on tankers, the prices of the crudes from these countries have jumped and significantly narrowed the discounts to the international Brent benchmark.
Refining margins at the private refiners, the so-called teapots, slumped to negative this week for the worst performance since 2024, per data tracked by JLC International Ptd Ltd cited by Bloomberg.
Two weeks after the war in the Middle East began and after it became clear that the Strait of Hormuz wouldn’t be re-opening within days, China banned all fuel exports as crude oil supply from the Middle East crumbled and forced Asian refiners, which depend on Persian Gulf supply for a large part of their crude slates, to turn to costly alternatives.
By Charles Kennedy for Oilprice.com
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