Chinese oil majors start offloading crude as refinery operations slow

China’s leading state-owned oil companies have begun selling crude cargoes for May delivery, marking an unusual shift as refining activity declines due to high prices and limited supply from the Middle East.

Recent market activity shows that major players such as Sinopec and Sinochem have already sold crude sourced from countries like Nigeria and Ghana, with shipments mainly directed toward buyers in Asia, including Indonesia and Taiwan. This move comes as refiners adjust to tighter supply conditions and rising costs.

Refinery operations across China and other parts of Asia have been scaled back significantly. The disruption in crude flows—largely due to restrictions around the Strait of Hormuz—has made it difficult for Middle Eastern producers to deliver supplies, forcing refiners to reduce processing rates.

Earlier, China and several other Asian countries had also moved to restrict fuel exports in an effort to secure domestic availability. By mid-March, Sinopec had already lowered its refinery utilization by about 10%, equivalent to roughly 500,000 barrels per day, with additional reductions expected due to ongoing maintenance.

At the same time, Chinese authorities are reportedly urging private refiners to maintain strong output of gasoline and diesel, even if profitability is impacted. Officials have indicated that refiners cutting production to protect margins could face reductions in their future crude import quotas, which are allocated periodically by the government.

As a result of these combined pressures, overall refinery activity in China has continued to weaken. Recent data indicates that state-run facilities have been operating at below 70% capacity, marking the lowest utilization level in nearly two years.

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