China crude imports hit decade low amid Hormuz crisis — NRG-IA

Hormuz Bottleneck Forces Chinese Refiners Into Unprecedented Retreat — What Happened China’s crude oil imports plunged by 41.3% in June, hitting a decade-low as geopolitical tensions intensified. According to official Chinese customs data reported by OilPrice.com, overall imports fell to just 29.27 million tons, or approximately 7.12 million barrels per day (bpd). This sharp decline marks the lowest volume of crude purchases by the world's largest importer since October 2016. This severe contraction in supply flows has triggered a domino effect across China's industrial processing sector. Data from the National Bureau of Statistics published on Wednesday shows that Chinese refiners slashed crude processing by 17.7% in June compared to the same period last year. Total refinery throughput crumbled to 12.47 million bpd, setting a six-year low. The last time Chinese refineries operated at such a restricted capacity was in March 2020, during the initial outbreak of the COVID-19 pandemic, when global economic activity was nearly completely paralyzed. The current slowdown particularly impacts independent refiners in Shandong province, known as 'teapots', which are highly sensitive to price fluctuations on the spot market. How the Strait of Hormuz Crisis Choked Physical Flows The primary driver behind this logistical collapse is the acute geopolitical tension and physical disruptions in the Strait of Hormuz, a critical trade artery through which one-fifth of global oil consumption passes daily. The partial bottlenecking of this route has led to a significant increase in maritime freight rates and insurance premiums for oil tankers, artificially inflating the cost of crude delivered to Chinese ports. Alongside external logistical pressures, Chinese operators are also grappling with weakening domestic fuel demand. A slowdown in China's real estate and construction sectors has reduced diesel consumption, prompting refiners to limit operations to avoid accumulating expensive inventories. Instead of processing crude purchased at crisis-inflated prices, major operators chose to temporarily suspend operations for scheduled or unscheduled technical maintenance. Collapsing Refining Margins and Global Supply Repercussions The effects of this decision are already being felt in international markets through shifting refining margins and trade flows of finished products. While the reduction in Chinese purchases could temporarily cap global crude oil price increases, it signals a structural vulnerability in the Asian economy, which can no longer absorb massive volumes of Middle Eastern oil under unstable logistical conditions. For the global refined products market, the scale-back in Chinese refining means fewer volumes of diesel and gasoline available for export. This phenomenon risks keeping distillate prices high in European and Southeast Asian markets, even if crude oil prices experience temporary corrections. The interconnected nature of energy markets means that any bottleneck in Asia indirectly influences fuel prices globally. Supply Risks Loom Over the Second Half of the Year The outlook for the second half of the current year remains deeply uncertain, as the crisis in the Strait of Hormuz shows no signs of short-term resolution. Chinese operators may be forced to draw down commercial state reserves to cover the supply deficit, a measure that offers only temporary protection against high prices. If disruptions in the Middle East persist, Chinese refiners might be forced to reconfigure their import routes toward alternative land-based sources or Atlantic Basin supplies. However, such a transition involves substantial additional logistical costs, which risk keeping refinery profit margins under constant pressure and affecting energy supply stability across the entire region.