China has sharply reduced crude oil imports in response to the ongoing disruption in the Strait of Hormuz, but deeper cuts may soon threaten fuel and petrochemical supply, Michal Meidan, analyst at the Oxford Institute for Energy Studies, said in a note on Wednesday.
China's crude imports fell to 9.3 million barrels per day in April from an average of about 11 mb/d over the past five years. Seaborne imports are expected to decline further into early summer as refiners cut processing rates.
Meidan looked at how long China can continue lowering imports before it is forced to return to the market or begin drawing down oil inventories more aggressively.
He said China still has several tools available, including refinery run cuts, fuel yield adjustments, and stock management. But each option carries trade-offs.
Under one scenario, a 10% reduction in refinery runs could cut seaborne imports to as low as 7.2 mb/d. However, this would require refiners to prioritize gasoline and diesel production over petrochemical feedstocks, a strategy the report said would be difficult to sustain for more than a few months.
A more moderate 5% cut in refinery runs appears more viable over a longer period. At around 8 mb/d of seaborne imports, China could largely meet domestic fuel demand while limiting damage to petrochemical output.
China's effective crude import "red line" is not a single number but depends on a combination of refinery operating rates, product yield management and stock policies.
Pushing imports too low without drawing inventories would force steep refinery cuts that could undermine petrochemical supply, while keeping run cuts modest would require policymakers to accept controlled stock draws and continued intervention in fuel prices and export volumes.