China moves to ease energy crisis with fuel export revival

China is preparing to resume exports of refined fuels — including jet fuel, gasoline, and diesel — from May, a move that could help alleviate global supply shortages triggered by the ongoing Iran conflict.

According to multiple trading sources, cited by the Financial Times, major state-owned oil companies have applied for export permits for May shipments, signalling a possible relaxation of restrictions introduced at the start of the war to safeguard domestic supply. China, the world’s largest oil importer, is also a key exporter of refined fuels to countries such as Australia, Japan, Vietnam, the Philippines, and Bangladesh.

Before the conflict began, China exported nearly 800,000 barrels per day of refined fuels, according to data from Kpler. That figure dropped by roughly half in April following the imposition of export controls.

A source at a state oil company said authorities now view domestic fuel demand as “stable,” allowing for a return to international markets. Another person familiar with Beijing’s plans indicated that exports would likely focus primarily on jet fuel to Asian markets facing acute shortages, along with smaller volumes of gasoline and diesel.

Asia has been particularly affected by the energy crisis, as regional refineries depend on imports for around 80% of supply, with Gulf producers accounting for roughly half of that. China has already agreed to provide limited fuel supplies to some countries in the region on a humanitarian basis.

“A resumption of oil exports could significantly ease supply shocks in south-east Asian countries. Within Asia, China is the only country with the capacity to export at scale,” said Liao Na, founder of GL Consulting, which specialises in China’s energy and industrial sectors.

“The previous government-to-government support schemes between China and these countries are unlikely to be sufficient to fully cover the shortfall,” she added.

Market participants also pointed to early signs of policy easing. One source at an international trading house said several state-owned Chinese refineries had already received new export quotas, while another said a return of Chinese exports “would go a long way” toward easing current supply disruptions.

In March, China added approximately 40 million barrels of crude oil to its reserves while refinery output declined by about 1 million barrels per day. Despite having built up record stockpiles before the conflict, Beijing has remained cautious about supply risks, tightening controls on some commodities, including certain fertiliser blends.

China’s export restrictions have drawn criticism from foreign officials and analysts, who argue that the measures were poorly communicated and heightened concerns about global energy availability.

Although analysts had previously suggested that a significant policy shift would depend on the resumption of navigation through the Strait of Hormuz, there have already been limited exceptions. In April, some cargoes were shipped to Vietnam, Malaysia, and Singapore, according to research by Rystad Energy citing vessel-tracking data from Vortexa. Analysts said these shipments likely reflected a combination of regional supply shortages and diplomatic considerations.

By Tamilla Hasanova