(July 11): China instructed some major refiners to keep fuel production high, according to people familiar with the matter, in an effort to protect domestic consumers as strikes in the Persian Gulf once again threaten oil shipments.
In the early stages of the Iran war, concerns over local fuel availability prompted China to curb sales of gasoline, diesel and jet fuel to overseas customers. Asia’s top crude consumer later eased those rules, including by granting more export permits earlier this month.
Now a flare-up in violence — along with a US move to revoke a waiver allowing the sale of Iranian oil — threatens an interim US-Iran peace deal and is heightening Beijing’s fears of renewed interruptions to crude and fuel supply, the people said, asking not to be identified as discussions aren’t public.
At least two major refineries have been asked to maintain or increase run rates, the people said, despite China’s elevated gasoline and diesel inventories and a structural slowdown in consumption of both.
Even prior to the conflict, Beijing maintained strict control of oil-product shipments via a quota system. Export quotas for July won’t be revised, one of the people said.
One consequence of higher run rates, however, will be additional pressure on regional refining margins, with the spread between Asian gasoline prices and Dubai crude already falling to its lowest level since late March.
See also: India’s ONGC approves project to increase strategic crude reserves
China’s National Development and Reform Commission, responsible for economic planning, didn’t immediately reply to Bloomberg queries sent outside of regular working hours.
Uploaded by Liza Shireen Koshy
