Chinese refineries are evolving to focus on chemicals rather than gasoline or diesel.

This aligns with China’s industrial goals, as it remains the world’s manufacturing hub. And major oil producers, like Saudi Arabia, are investing in these transitions. For example, Saudi Aramco recently acquired a 10% stake in a Chinese refinery, securing crude supply while preparing for reduced global demand for traditional fuels. Similar investments in China and India are likely as producers adapt to the shift toward new energy and petrochemicals.

Will a lower oil price trajectory this year necessarily mean more oil imports for China?

Historically, China has taken advantage of low oil prices to build its reserves, particularly through its independent refiners. These smaller refiners benefit more from lower prices, especially as tariffs have risen by about 3% this year, pushing them toward importing more crude. However, refining margins for smaller players are under pressure, hovering around $15–$16 per barrel, similar to pre-COVID levels when overcapacity was a significant issue. We’ve moved past the strong margins seen after the Russian invasion of Ukraine. Now, with demand subdued, especially for diesel, even during the winter, margins remain weak. Gasoline has shown some seasonal improvement, but it’s not enough to make a substantial difference. As we approach the off-peak season for diesel and the refining market remains oversupplied, smaller refiners are likely to struggle despite lower crude prices.