[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 continued for more than 1 month, and as fighting in the Middle East threatens to upend global crude oil trade, Chinese officials have reportedly instructed private refining companies to maintain their refined product output at 2025 levels, even if that could mean operational losses.

Citing people familiar with the matter, Bloomberg reports that the National Development and Reform Commission held a senior-level meeting with private refining companies this week, saying it should take the bigger picture into account and ensure domestic refined fuel supply, with gasoline and diesel production at least matching last year. Reportedly, any refineries that reduce operating rates and output in the future will face corresponding reductions in their petroleum import quotas.

In the week ending April 1, the operating rates of China’s independent refiners had fallen to below 63%, the lowest level since August last year. According to tracking data from JLC International Ptd Ltd., their refining profit margins this week 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. Those crude oil prices come with significant discounts, helping independent refiners get through periods when refining profit margins were extremely thin. But after the U.S. granted temporary exemptions for some Iranian and Russian crude oil, those discounts have nearly disappeared.

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