The Chinese government urged state oil refining companies to halt fuel export in April despite skyrocketing global energy prices. According to Bloomberg, overseas shipments’ stalling was made to meet higher local consumption in the coming period.

According to JLC, a Singapore-based import-export company, China’s oil products exports fell one-third over January and February from a year earlier despite its large oil refining capacity, estimated at 16.69 million barrels a day in 2020.

Chinese oil giants are likely to speed up fuel production while reducing exports to fill in the supply gap from its private refiners, who are under pressure to process less upon surging feedstock costs. These independent refiners, called teapots, are also struggling with the high freight costs.

Emma Li, an analyst at Vortexa Ltd., said: “Chinese state-run companies are likely to review their export schedules for the second half, and keep the second quarter volumes at a minimum.”

The invasion of Ukraine has caused chaos in fuel markets. The US and the UK ban Russian oil and gas imports along with the SWIFT sanctions in the drive to punish the world’s No. 2 crude exporter.

Disruption of fuel supplies has driven global oil prices to 14-year highs, potentially squeezing profits for oil refiners. According to Bloomberg, China’s refiners’ imports around 70% of its needs.
Upon geopolitical risk, fuel export of China’s refiners is likely to remain limited to secure domestic supply.

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