【Iran Crisis】China reportedly urges private refining companies to prioritize the overall situation and maintain at least last year's production levels

The Iran war has been ongoing for more than a month, and as fighting in the Middle East upends global crude oil trade, Chinese officials, according to reports, have instructed private refining firms to keep their finished fuel output at the 2025 level, even if this could mean operational losses.

Bloomberg, citing people familiar with the matter, said the National Development and Reform Commission held a meeting this week with senior executives of private refiners. It indicated that the overall situation should be taken into account to ensure domestic finished fuel supply, with gasoline and diesel output at least matching last year. It is claimed that refineries that reduce operating rates and output in the future will face a corresponding reduction in their crude oil import quotas.

For the week ending April 1, the operating rate of China’s independent refineries had fallen to less than 63%, the lowest level since August last year. According to data tracked by JLC International Ptd Ltd., their refining margins this week were negative, the worst since 2024.

Since the Iran war broke out, China’s independent refiners (local refineries) have been under pressure because they rely on sanctioned crude oil from Iran, Russia, and Venezuela, while larger refineries often avoid it. These crudes come with hefty price discounts, helping independent refiners get through periods when refining profits were extremely thin. But after the United States granted temporary exemptions for some Iranian and Russian crude oil, these discounts have almost disappeared.

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