Tensions between China and Japan have moved beyond verbal exchanges. China has issued warnings against traveling to Japan, leading to more than 500, 000 cancelled trips. It has also suspended imports of Japanese seafood. This round of tension is different from past episodes because the strong sentiment is present not only among the public but also within the government and military. China views Japan’s actions as crossing a “red line, ” and further measures from Beijing are expected as the situation has not cooled.
Crude Import Slowdown and Stockpile Pause
China is unlikely to continue building its crude stockpiles in the first months of next year because refiners have been doing so for several months and are now more cautious. Some refiners worry about issues with the United States, leading to reductions in purchases of Russian cargoes. As a result, China’s crude imports are expected to decline in the last two months of the year. Diesel demand is falling, but crude runs remain stable. This stability is attributed to refinery upgrades that shift production away from gasoline and diesel and toward chemicals.
Refinery Upgrades and Changing Product Output
Several refiners added chemical-oriented units this year, allowing them to significantly cut gasoline and diesel production, such as Sinopec’s LOTC technology, which can reduce diesel production to zero at certain facilities. These changes support crude runs. However, refined product exports will drop due to limited remaining quotas, with new quotas for next year likely to be released only at the end of December.