Due to the rise in crude oil prices and the lack of corresponding increases in downstream product prices, local refineries’ profits have dropped to a three-month low in June. This has led to a cautious attitude among local refinery enterprises in the global crude oil market, with some suspending procurement.
Bloomberg reported on Tuesday (June 24) that geopolitical dynamics affecting oil prices and weakened domestic demand have eroded the profitability of Chinese oil refineries. As a result, Chinese refiners are adopting a wait-and-see approach in the global crude oil market, pausing their purchases.
According to an anonymous trader, the activities of Chinese “teapot refineries” in the spot crude oil markets of countries like Iran and Russia have decreased. These refineries typically purchase a significant portion of their crude oil from these countries at discounted prices.
Based on data from Kpler Ltd. as of Sunday (June 22), crude oil inventories on floating storage and offloading vessels have reached 33.9 million barrels, the highest level since December 2023. China usually buys the majority of Iran’s daily crude oil exports of 1.7 million barrels.
Additionally, traders participating in the Iranian crude oil market have noted that the price of Iranian crude has decreased, being lower by approximately $3 per barrel compared to Brent crude oil futures.
Reports citing data from the commodity industry consulting firm JLC Ltd. indicate that the profit margins of local refineries have dropped to the lowest level in nearly three months. While state-owned refineries have higher profitability, they are also experiencing a downward trend.
Furthermore, according to forecasts from Zhuo Chuang Information, for the week ending on June 20, the theoretical profits of the three major production routes in the industry – comprehensive refining, refining-olefins, and refining-aromatics – have been severely impacted. Among them, the comprehensive refining and refining-olefins routes have clearly fallen into a loss range, with losses surging by over 561% and 329% respectively. Although the refining-aromatics route has managed to maintain profitability, the meager profit of 5.37 yuan per ton is now in jeopardy.
Based on Zhuo Chuang Information’s profit model calculations, as of June 20, the cost of crude oil has risen by 13.57% compared to the previous Friday (June 13). This substantial cost pressure is posing significant challenges for the downstream processing sector. However, transferring this cost pressure smoothly into the downstream product market has proven to be difficult.
Among the downstream products, although prices of 91% of items have increased compared to the previous Friday, the price hikes are generally limited, ranging from 0.06% to 10.4%, which do not cover the 13.57% cost increase over the same period. This implies that the revenue generated from price increases is insufficient to offset the rising raw material costs.
On Thursday (June 26), relying on refinery production forecasts, Zhuo Chuang Information predicts that in 2025, China’s crude oil processing volume may fall to 728 million tons; total production of finished oil may decrease to 4042.857 million tons, a year-on-year decrease of 5.22%; and the total demand for finished oil is expected to be 3797.605 million tons, a year-on-year decline of 6.57%.
According to statistics from JLC Ltd., in April 2025, the apparent consumption of diesel in China was 15.1249 million tons, a month-on-month decrease of 6.05% and a year-on-year decrease of 8.39%.
Finished oil generally refers to gasoline, diesel, and kerosene. Over half of China’s crude oil is used for the production of finished oil, which is the main business of petrochemical companies. Taking Sinopec as an example, in 2024, Sinopec’s revenue from gasoline, diesel, and kerosene businesses was about 1.5 trillion yuan, accounting for approximately 49% of total revenue.
Bloomberg New Energy Finance predicted in March that by 2025, new energy vehicles in China will replace approximately 870,000 barrels of finished oil per day (equivalent to about 43.5 million tons per year).
In 2024, both China’s oil imports and consumption experienced declines. According to data from the National Bureau of Statistics of China, in 2024, China’s daily crude oil imports averaged 11.04 million barrels, a year-on-year decrease of 1.9%. According to “China Energy Outlook 2060” released by Sinopec, in 2024, domestic petroleum consumption was 750 million tons, marking the second time in nearly 20 years that petroleum consumption had decreased.