China Fuel Inventories Hit Multi-Year Lows Amid Supply Disruptions

The Government of China is facing a tightening domestic fuel market as petrol and diesel inventories have dropped to multi-year lows. Petrol stockpiles at state-owned suppliers fell 2.9 percent last week, reaching the lowest level since 2022, while diesel holdings hit a 15-month low. These shortages increase the likelihood that the government will impose export curbs on fuel products during the fourth quarter.

Domestic supply is further strained by several international disruptions. A United States blockade of Iranian crude, the closure of the East-West pipeline in Saudi Arabia, and Houthi territorial gains in Yemen affecting Red Sea shipments have all limited available oil.

Independent refiners, known as teapots, are experiencing severe shortages of Iranian crude. To maintain operations, these refiners are paying rising premiums for alternative oil sourced from Africa and Latin America, a cost increase that may eventually force them to reduce production rates.