China's transportation fuel exports rebounded in July after Beijing removed export restrictions in late June, while refiners increasingly favored crude barrels offering reliable delivery and lower freight costs amid renewed disruption around the Persian Gulf and the Bab el-Mandeb, Vortexa analyst Emma Li said in a Tuesday note.
Exports to destinations beyond Hong Kong and Macau rose to 510,000 barrels per day in July, from 220 kbd in the second quarter. August exports are expected to reach about 680 kbd, the highest since July 2025, although some volumes could roll into September because of limited time to arrange shipments.
The relaxation of restrictions signals a gradual shift toward supporting economic activity, while Beijing continues to require refiners to maintain product inventories above February levels, Vortexa said. It also suggests greater confidence among state planners in China's ability to safeguard domestic energy supplies during prolonged disruption to oil flows.
Asian product cracks have strengthened, but higher feedstock costs driven by rising transportation costs could limit gains in refining margins, Li said.
China's refinery runs recovered in July, supported by higher arrivals of non-Iranian Middle Eastern crude and faster crude inventory draws. Refiners are increasingly favoring barrels that can be delivered reliably at reasonable freight costs, including sanctioned crude already floating in Asian waters and shorter-voyage barrels.
Beijing has also quietly allowed state-run refiners to purchase western-sanctioned Russian energy products through intermediaries while seeking to avoid traceable payments, Li said. Sanctioned crude grades are likely to gain market share in August, while Iranian crude imports and consumption should rebound as floating inventories accumulated in Asia during July discharge.
Russian crude imports are also likely to exceed their 2025 average, supported by renewed purchases of Russian Far East crude by Chinese oil majors and the seasonal reopening of the Northern Sea Route.
China's crude inventories remained above early-2025 levels at the end of July, despite a 1 million bpd draw, the deepest monthly decline since February 2023. Even with state-owned inventories drawn down at 1 million bpd, accumulated stocks would provide about four months of supply at current levels, reducing the incentive to pursue long-haul, high-freight cargoes.
Li said China's seaborne crude demand may recover more slowly than refinery runs suggest, with incremental demand increasingly concentrated in short-haul, discounted or blockade-free barrels