China Keeps Fuel Production High as Iran War Threatens Oil Shipments

SadaNews - China has instructed some major refineries to maintain high levels of fuel production, according to sources familiar with the matter, in an effort to protect the domestic market from any potential shortages, as military strikes in the Gulf threaten oil shipping operations again.

During the early stages of the Iran war, concerns about local fuel availability prompted Beijing to reduce gasoline, diesel, and jet fuel sales to overseas customers. However, it later eased these restrictions, including by issuing additional quotas for the export of petroleum products earlier this month.

The Iran War Threatens the Oil Market Again

A resurgence of violence, alongside the U.S. decision to cancel the exemption that allowed for the sale of Iranian oil, poses a threat to the temporary peace agreement between Washington and Tehran, increasing Beijing’s concerns about the possibility of new disruptions to crude oil and fuel supplies, according to sources who spoke on the condition of anonymity due to the confidential nature of the discussions.

The individuals added that the authorities requested at least two major refineries to maintain or increase their current operating rates, despite rising stocks of gasoline and diesel in China and the ongoing structural slowdown in the consumption of these products.

Beijing had imposed tight controls on the export shipments of petroleum products through a quota system even before the outbreak of the conflict. One of the individuals said that the export quotas allocated for July would not see any adjustments.

An increase in refinery operating rates is expected to put more pressure on refining margins in Asia, as the price gap between Asian gasoline and Dubai crude has fallen to its lowest level since late March.

The National Development and Reform Commission of China, responsible for economic planning, did not respond to Bloomberg's inquiries sent outside of official working hours.