China's crude oil imports plunged year over year in April; refined product demand remained weak and export policy changes warrant attention
AI summary card
China's crude oil imports plunged year over year in April; refined product demand remained weak and export policy changes warrant attention
UBS believes that Middle East geopolitical disruptions, weak domestic demand, and refined product export restrictions are jointly weighing on China's refining industry, so a cautious stance is warranted in the near term.
- In April, China's crude oil imports fell 20% year over year to 38.47 million tonnes, the lowest level since July 2022.
- Operating rates at major domestic refineries fell 5.9 percentage points month over month to 70.8%, below the roughly 80% average for 2025.
- Gasoline and diesel inventories remain elevated; UBS believes this is mainly due to demand suppression from high oil prices and restrictions on refined product exports.
- China suspended refined product exports in March, but Reuters reported that 500,000 tonnes of exports to destinations outside Hong Kong were approved in May, doubling April's level.
- UBS estimates that even assuming strategic petroleum reserves are released at the maximum pace, there could still be a shortfall of about 3.5 million barrels per day in Middle Eastern refined product exports.
Report interpretation
Overview
The report focuses on China's refined product market and global refining supply disruptions. In April, China's crude oil imports fell sharply, major domestic refinery operating rates declined, and gasoline and diesel inventories remained high, indicating that refined product demand is still weak. At the same time, refining capacity in the Middle East has been affected by conflict, strikes, or attacks. Combined with global refinery maintenance and disruptions at some refineries in Russia, Australia, and the United States, this has created significant uncertainty on the global refined products supply side.
Core views
UBS's core view is that China's domestic refining industry is under near-term pressure. On the one hand, heightened geopolitical tension in the Middle East has pushed up official crude selling prices, freight, and insurance costs; on the other hand, weak domestic gasoline and diesel demand, elevated inventories, and continued export policy constraints are pressuring refinery margins and utilization rates. While refined product exports may recover modestly in May, the pace of policy adjustment remains the key variable.
Analysis framework
The report analyzes monthly imports, inventories, refinery operating rates, gasoline and diesel prices, refined product export policy, and global refining capacity outages, and uses Kpler data, Reuters reporting, expert call views, and UBS estimates to assess supply-demand gaps and industry pressure.
Methodology notes
Use import volumes, inventories, refinery operating rates, demand, and export policy to assess the refining industry's cycle.
When imports decline, operating rates fall, and end-market demand remains weak, refineries face higher costs and inventory pressure; if export policy eases, it may partially relieve domestic refined product inventory pressure.
Assess the impact of refinery disruptions in the Middle East, Russia, Australia, and the United States on global refined product supply.
UBS estimates that more than 3.5 million barrels per day of refining capacity in the GCC has been shut down, of which more than 2 million barrels per day may be damaged and require repairs; global offline capacity in April may have exceeded roughly 12 million barrels per day.
Estimate the remaining crude oil and refined product gap after maximum SPR releases.
Even assuming strategic petroleum reserves are released at the maximum pace, Middle Eastern refined product exports could still leave a remaining shortfall of about 3.5 million barrels per day; the actual gap may be larger if the release pace is slower than the theoretical maximum.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- China refining sectorcore research focus
- Strengths
- If export policy eases, refined product inventory pressure may decline; large refineries have relative advantages in supply chain execution and policy compliance.
- Weaknesses
- Domestic refined product demand is weak, gasoline and diesel inventories are high, operating rates are falling, and import costs are rising due to Middle East disruptions.
- Comparison
- Independent refiners have long underperformed Sinopec and PetroChina and are operating at lower utilization levels.
- Risks
- Policy restrictions, price controls, insufficient demand, refining-margin volatility, and mechanical failures.
- SinopecRepresentative of China's major refining and refined products marketing companies
- Strengths
- Broad regional coverage, a strong refined products sales network, and integrated refining-and-chemical capabilities.
- Weaknesses
- Highly exposed to domestic supply-demand conditions, price discounts, and policy intervention.
- Comparison
- Charts show its performance is usually better than that of independent refiners and broadly similar to PetroChina.
- Risks
- Downstream price controls, tax changes, inventory pressure, and lower refinery operating rates.
- PetroChinaRepresentative of China's major oil and gas and refining company
- Strengths
- A relatively complete upstream and downstream business structure, with some integrated hedging capability.
- Weaknesses
- Refining and refined product sales are still constrained by domestic demand and the policy environment.
- Comparison
- Charts show its performance is broadly similar to Sinopec's and usually better than that of independent refiners.
- Risks
- Oil price volatility, seasonal refining-margin swings, foreign exchange movements, and macro demand changes.
- Middle Eastern and GCC refineriessource of global refined product supply disruptions
- Strengths
- Under normal conditions, they are an important source of refined product export capacity.
- Weaknesses
- Conflict, attacks, and outages may reduce utilization to around 50%.
- Comparison
- The current disruption scale is clearly larger than the less-than-1 million barrels/day impact seen during the Russian refinery drone attacks in autumn 2025.
- Risks
- Facility damage, repair timelines, geopolitical escalation, and SPR releases that fall short of expectations.
Key data
- China crude oil imports in April38.47 million tonnes, -20% y/yThe lowest level since July 2022.
- China crude oil inventoryabout 1.3 billion barrelsEquivalent to about 76 days of crude oil demand and more than 100 days of crude oil imports; broadly stable since March.
- Operating rate of major refineries70.8%Down 5.9 percentage points month over month in April, below the roughly 80% average for 2025.
- Operating rate of Shandong independent refineries55.2%Up 0.8 percentage point month over month in April, relatively stable.
- April retail price adjustment for gasoline and dieselgasoline cut by CNY 135/ton in total, diesel cut by CNY 130/ton in totalAverage market prices fell by nearly CNY 1,000/ton and CNY 300/ton respectively due to weak demand.
- Approved refined product export volume in May500,000 tonnesAccording to Reuters, export volumes to destinations outside Hong Kong doubled from April, about 30% of the level before the Iran conflict.
- Remaining shortfall in Middle Eastern refined product exportsabout 3.5 million barrels/dayUBS estimate under the assumption of maximum SPR releases.
- GCC offline refining capacitymore than 3.5 million barrels/dayOf which more than 2 million barrels/day may have been damaged and require repairs.
- Global offline refining capacitypossibly above about 12 million barrels/dayAffected in April by Middle East disruptions, global maintenance, Russian drone attacks, the fire at Geelong refinery in Australia, and the strike at the Whiting refinery.
Impact & implications
For Chinese refining companies, rising import costs, weak domestic demand, and elevated inventories may compress refining margins and limit recovery in operating rates. If refined product export policy continues to ease, inventory pressure may ease marginally; but if exports remain constrained or crude costs continue to rise, earnings volatility and competitive pressure in the domestic refining sector could increase. For the global refined products market, outages at refineries in the Middle East and elsewhere may tighten supply and drive regional spreads and refining-margin volatility.
Risks
- An oversupplied Chinese refining and refined product retail market may translate into domestic price discounts and higher exports.
- Government policy changes may affect the industry outlook, including refined product export restrictions, downstream price controls, taxes and fees, and upstream windfall taxes.
- Changes in the global economy, foreign exchange, and oil prices may significantly affect oil prices, refining margins, and petrochemical spreads.
- Oil prices, refining margins, and petrochemical spreads are highly seasonal, which may lead to quarterly earnings volatility.
- Upstream and downstream projects carry execution and timing risks, and downstream assets also face mechanical failure risks.
- Conflicts in the Middle East, attacks on Russian assets, refinery fires, or strikes may make the global refined products supply gap larger than theoretical estimates.
What to watch
- Whether China's refined product export policy is further eased, and whether export quotas and destination restrictions change.
- Whether domestic gasoline and diesel inventories decline, and whether end-demand recovers.
- Whether operating rates at major refineries and Shandong independent refineries rebound.
- Changes in official selling prices, freight, and insurance costs for Middle Eastern crude.
- Repair progress at damaged GCC refineries and the pace of actual capacity restoration.
- Whether offline capacity declines after the global refinery maintenance season ends.
- Whether the pace of SPR releases is slower than the theoretical maximum.