China has prioritized its domestic security by halting most refined fuel exports in October 2023, exacerbating the global diesel shortage. This decision comes at a time when fuel inventories in China have sharply declined.
Export Halt by Petrochemicals
PetroChina has canceled several shipments of gasoline and jet fuel that were scheduled for October. Additionally, Zhejiang Petrochemical has not planned any exports during China's one-week national holiday. While Beijing has yet to authorize October exports to outside Hong Kong and Macau, shipments may resume after the holiday ends on October 7, depending on domestic inventory and refinery production.
Read more: Brent and West Texas Crude Prices Under Pressure from Rising U.S. Inventories
Severe Decline in China's Fuel Inventory
This action follows a severe decline in fuel inventory levels in China. According to Kpler estimates, China's commercial diesel and gasoil inventories are about 20 million barrels lower than pre-war levels, while gasoline inventories are nearly 9 million barrels below the level Beijing wants to reach before normalizing exports. China had significantly increased its exports during the summer, and official customs data shows that total petroleum product exports in August reached 6.01 million tons, a 12.7% increase from last year and the highest figure since March 2024.
This shift in China's export policy comes as global diesel supplies are under pressure due to Middle Eastern disruptions and Ukrainian attacks on Russian refineries. S&P Global warned this week that Asian fuel markets are facing limited excess supply, and any further restrictions on U.S. diesel exports will increase competition for Asian and Middle Eastern barrels.
The Chinese government has also partially limited the planned price increases for gasoline and diesel in September to mitigate the impact of high international oil prices on the domestic market and has instructed refineries to ensure stable supplies.
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