China fuel oil imports crash 76% as refiners opt for crude

China's fuel oil imports tumbled to a record monthly low of about 559,000 metric tons in May as refiners cut output and shifted to cheaper crude after the U.S.-Iran war upended supply routes, industry sources said.

"Regular crude oil is currently trading at ICE levels of minus $5 to minus $8 a barrel," a trading source from a Chinese refiner said, declining to be named due to commercial sensitivity. "Fuel oil can't compete with that now."

June imports recovered slightly to 700,000 to 800,000 tons, Vortexa ship-tracking data show, but remained well below the 2.29 million-ton monthly average in the first quarter. The 380-centistoke HSFO crack to Dubai rose to a premium above $3.25 a barrel Wednesday, LSEG data show, while Asian refiners' margins for the grade narrowed to a discount of less than $2 a barrel to Brent.

The demand collapse at one of Asia's top fuel oil importers threatens to cap global HSFO prices even as Middle East hostilities disrupt Gulf shipments through the Strait of Hormuz. Chinese refineries processed just 12.47 million barrels per day in June, the lowest since March 2020, as crude imports crashed 41% from a year earlier to a decade-low of 29.27 million tons.

Imports Hit Record Low as Refinery Runs Slump

China's total fuel oil imports in May slumped to about 559,000 metric tons, or 115,000 barrels per day, based on LSEG data that dates back to 2004. The volumes include HSFO processed at refineries or used as marine fuel supply. The monthly average in 2025 stood at 1.8 million tons, while the first quarter of 2026 averaged 2.29 million tons per month — meaning May imports were roughly 76% below the quarterly run rate.

Refinery run rates in China plummeted to a ten-year low in June because of weak domestic demand and export curbs on refined oil products after the conflict broke out. The average run rate fell to an estimated 57.72% in June, down 3.28 percentage points from May, according to data from consultancy Oilchem cited by Reuters. That compares with 66.3% in May. Overall crude processing slumped 17.7% from a year earlier to 12.47 million barrels per day, the lowest since the onset of the pandemic in March 2020, according to the National Bureau of Statistics.

Cheaper Crude Sidelines Fuel Oil Demand

Chinese refiners have turned to discounted crude as they sought to use additional import quotas issued this year, further dampening appetite for fuel oil as an alternative feedstock. Spot offers for Russian straight-run fuel oil are currently muted because of low buying interest, traders said. Russian fuel exports have also dropped as Ukraine ramped up attacks on Russian infrastructure.

Fuel oil imports could have rebounded slightly in June and July, but the volumes are mostly used for ship refueling rather than refinery processing, traders and analysts said. While Beijing eased export curbs for refined products this month, it was not immediately clear if this will drive a sharp recovery in run rates and feedstock purchases.

The last time Chinese crude imports fell to comparable levels was during the 2020 pandemic, when demand evaporated during global lockdowns. The current downturn, by contrast, stems from a supply-side shock — the disruption of Gulf crude flows through the Strait of Hormuz after Washington and Tehran stepped up attacks — combined with structurally weak domestic fuel demand. If the conflict persists, Chinese refiners may need to maintain reduced run rates through the third quarter, keeping fuel oil imports well below pre-war levels.

This article is for informational purposes only and does not constitute investment advice.