China Refinery Runs at Four-Year Low as Crude Imports Plunge

Chinese refiners reduced their run rates to the lowest in four years in May, as crude imports dropped to an eight-year low, according to Bloomberg citing official statistics. The average run rate stood at 66.3%, with total volumes processed down 9.1% year-on-year to 53.72 million tons. This marks the weakest throughput since 2020, when the pandemic crushed global demand. The decline in refinery activity reflects weakening demand in the world's largest crude importer, a key driver of global oil prices. Lower runs mean reduced crude intake, which could weigh on benchmark prices like Brent and WTI. For traders, this data point is a bearish signal, as China's appetite for crude has historically supported the market. NowPrice's real-time fuel quotes show Brent crude trading near $72 per barrel, with further downside risk if Chinese demand continues to soften. The Brent-WTI spread remains narrow near $3, while US Strategic Petroleum Reserve levels sit at 370 million barrels, providing a cushion against supply disruptions. Crack spreads—the margin between crude and refined products—have narrowed in Asia, indicating weak gasoline and diesel demand, which further pressures refinery margins. China's marginal demand has been a key swing factor in global oil balances, and this drop adds to concerns about oversupply, especially with OPEC+ spare capacity estimated at over 5 million barrels per day, much of it held by Saudi Arabia and Russia. The contango structure in Brent futures suggests ample supply, while backwardation in WTI has eased, signaling looser markets.

Looking ahead, market participants will watch for any signs of a rebound in Chinese industrial activity or government stimulus measures that could boost fuel consumption. The next round of Chinese economic data, including industrial production and retail sales, will be closely monitored for clues on demand recovery. Additionally, OPEC+ production decisions and US inventory data will remain in focus as the market balances supply against weakening demand signals from Asia. Saudi-Russia coordination remains critical, as any disagreement could flood the market. Traders will also track US crude stockpiles, which have been volatile, and the potential for a summer driving season boost in gasoline demand. If China's slowdown persists, Brent could test $70 support, with further downside if OPEC+ unwinds cuts.