[Iran Crisis] China reportedly requests private refining companies to prioritize the overall situation and maintain at least last year's production levels

The Iran war has been going on for more than a month, and as fighting in the Middle East upends global crude oil trading, Chinese officials have reportedly instructed private refining companies to keep finished fuel production at the 2025 level even if they may incur operational losses.

Citing people familiar with the matter, Bloomberg reported that the National Development and Reform Commission held a meeting this week with senior executives of private refineries. The meeting indicated that they should take the bigger picture into account and ensure domestic finished fuel supply, with gasoline and diesel output at least matching last year. It is said that any refineries that reduce operating rates and output in the future will face corresponding cuts to their oil import quotas.

In the week ending April 1, the utilization rate of China’s independent refineries had fallen to below 63%, the lowest level since August last year. Based on tracking data from JLC International Ptd Ltd., this week their refining profit margins were negative, the worst since 2024.

Since the outbreak of the Iran war, China’s independent refineries (local refineries) have been under pressure because they rely on sanctioned crude oil from Iran, Russia, and Venezuela, while large refineries often tend to avoid it. These crude oil price discounts are substantial and helped independent refineries get through periods when refining profits were extremely thin. But after the U.S. temporarily granted exemptions on some Iranian and Russian crude oil, these discounts nearly disappeared.

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