Resource Nationalism: China Halts October Fuel Exports, Tightening Global Diesel Squeeze

A sense of resource nationalism is gripping the world, whether it involves copper, rare earths, other critical materials or, of course, refined crude products.

Kicking off Thursday, a Reuters report said that the Trump administration has asked Germany and France to release emergency diesel inventories to help create a buffer against the supply squeeze in the industrial fuel or face a potential US diesel export ban.

President Trump has floated a diesel export ban for weeks, while US oil refining executives have warned against it, saying it would only send prices higher.

Now a separate Reuters report says Chinese refiners have suspended October fuel exports as Beijing prioritizes rebuilding domestic stockpiles, threatening to deepen the refining crisis and cause havoc on import-heavy countries. 

This adds to a toxic combination of Russian export halts on industrial fuel following Ukrainian attacks on Russian refineries with one-way attack drones and ongoing hostilities at the Hormuz chokepoint. The latest data from Goldman indicate that, with ‘dark tankers‘ accounted for, crude flows through the critical waterway are back to pre-war levels, but refined-product flows are not.

More from Reuters: 

It was not clear whether Beijing would resume permitting refiners’ exports after the holiday ends on October 7, the sources said, adding it could depend on domestic fuel inventories and refining output.

China has the world’s largest refining capacity, but Beijing is clearly concerned about the global refining crisis and has prioritized boosting local inventories. 

“It highlights that the government’s focus remains domestic supply security. International markets are an afterthought,” said Michal Meidan, head of China energy research at the Oxford Institute for Energy Studies.

Zameer Yusof, a senior manager for clean oil products at Kpler, pointed out that Singapore, Malaysia, Australia, Vietnam, Bangladesh and the Philippines were some of the top destinations for Chinese fuel exports in September.

The risk is widening fuel protectionism, as governments worldwide could begin prioritizing domestic stocks ahead of the Northern Hemisphere winter. This could result in more export restrictions, leaving import-dependent countries competing for fewer available liquids on the open market. This protectionism doesn’t stop at crude products, as resource nationalism is accelerating.

Asian diesel markets have already responded to fears of missing Chinese supply, with October-November swap spreads hitting two-week highs.