China's diesel and gasoline reserves are falling, a development that may ultimately lead to the imposition of restrictions on fuel exports, according to Bloomberg, citing the latest reserve data. Gasoline inventories at state energy companies dropped by 2.9% last week, reaching their lowest level since 2022, according to Chinese commodities market research firm JLC International. Diesel inventories stand at their lowest level in 15 months, having fallen by 2.4% last week, according to the report.
New restrictions on the table from Beijing
"As the domestic market tightens, we see a growing risk that Beijing will cap monthly refined petroleum product exports at around 1.2 million tons during the fourth quarter," Jiana Sun, an analyst at Energy Aspects, told Bloomberg. China had already imposed fuel export restrictions in the spring, when the war involving the US, Israel, and Iran raised concerns over fuel supply security for the world's largest crude oil importer, which is also a major exporter of refined products.
The March precedent
In early March, Beijing instructed energy companies to suspend new fuel export contracts and attempt to cancel previously scheduled shipments abroad as global fuel markets tightened. The export ban took effect immediately and covered all cargoes of gasoline, diesel, and aviation jet fuel that had not passed through customs inspection by March 11. As a result, gasoline and diesel reserves at state oil refineries reached their highest levels since 2025 and 2024, respectively.
Easing of restrictions and a new wave of exports
A month later, China eased export limits, while exports in June surged as the Middle East faced supply shortages and refineries suffered damage from drone missile attacks. The gradual relaxation of restrictions continued thereafter, leading to a significant rise in exports, particularly of fuel oil, which reached a high for 2026 in June.
A new blow to an already strained market
If China now moves to curb fuel exports to protect its domestic market, this will place even greater strain on a global market already facing severe global diesel shortages. These deficits cannot easily be resolved simply through supplier diversification, as there are no alternative suppliers available to replace current volumes, while energy market demand follows a seasonally upward trend.
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