Quick overview

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China’s government ordered the country’s top oil refiners to cease exporting gasoline and diesel as the escalating conflict in the Persian Gulf interferes with the arrival of crude from one of the world’s largest producing regions.

China’s restrictions just six days into a conflict demonstrate how Asia is rushing to prioritize domestic needs as the Middle East crisis worsens, even though the country is only the third-largest supplier of oil products to the region—its vast refining industry primarily meets domestic demand.

Representatives of the National Development and Reform Commission, the country’s top economic planner, reportedly called for an immediate temporary stop to shipments of refined goods. They asked to stay anonymous because the conversations are private.

The people claim that during a meeting earlier this week, refiners were told to stop signing new contracts and negotiate the cancellation of shipments that had already been agreed upon.

PetroChina Co., Sinopec, CNOOC Ltd., Zhejiang Petrochemical Co., a private refiner, and Sinochem Group. obtain the government’s fuel export quotas.

China prohibits the unrestricted export of jet fuel, gasoline, and diesel. The Ministry of Commerce chooses a small number of major refiners and traders using a quota system. Polyethylene, paraxylene, and other chemical feedstocks are examples of petrochemicals that are typically not subject to the same standing quota cap.

The quota system accomplishes several objectives. It allows the government to react quickly to market conditions and provides Beijing with a way to balance domestic supply and demand. China’s authorities have regularly reduced or postponed export quotas since the start of Russia’s invasion of Ukraine in 2022, which also disrupted the world’s energy trade.