China and India ease fuel restrictions as supply fears recede

China will allow state-owned refiners to export up to 800,000 metric tons of refined fuel in July, up from roughly 600,000 tons in June, and is dropping destination restrictions for the first time since curbs were imposed in March, according to Reuters. The move marks the most substantial easing of Beijing's fuel export controls since the outbreak of the Middle East conflict disrupted global energy markets earlier this year.reuters

Beijing Loosens the Reins

At a meeting this week between government officials and state refiner executives, authorities set the new July export ceiling and removed limits on which countries can receive Chinese fuel shipments, three industry sources briefed on the plan told Reuters. Previously, exports outside Hong Kong and Macau had been restricted to between 400,000 and 500,000 tons per month during April and May, with shipments limited to a handful of regular buyers in Southeast Asia and Australasia.hydrocarbonprocessing+2

Beijing first ordered refiners to halt new export contracts in early March after the widening Iran conflict began disrupting crude supply and shipping through the Strait of Hormuz. Sinopec China Petroleum & Chemical Corporation and PetroChina, the country's largest processors, were told to cancel previously agreed cargoes of gasoline, diesel, and jet fuel. China's refined oil exports fell 38 percent year-on-year in April as the restrictions bit. The country also issued its second batch of 2026 fuel export quotas at 18 million metric tons in early June, steady with the prior year, though actual shipments remained well below quota levels.bairdmaritime+3

India Also Eases Fuel Restrictions

Separately, India's Ministry of Petroleum and Natural Gas on June 29 withdrew its June 12 order that had capped diesel sales at retail outlets to 200 litres per vehicle per day and barred commercial and industrial consumers from purchasing fuel at retail stations. The restrictions, imposed under the Motor Spirit and High Speed Diesel (Temporary Regulation of Supply through Retail Outlets) Order, 2026, will cease from July 1.deccanherald+3

The ministry said it was "satisfied that it is no longer necessary in the public interest to continue with the directions contained in the said Order," citing an improvement in the domestic supply situation following de-escalation of tensions in West Asia and the resumption of normal shipping through the Strait of Hormuz.deccanherald+1

Easing Tensions, Rising Flows

The twin moves by Asia's two largest fuel consumers signal that the worst of the supply disruptions triggered by the Middle East conflict may be passing. S&P Global ↗ 6.01% Commodity Insights reported on June 22 that market participants were closely watching the reopening of the Strait of Hormuz and progress in U.S.-Iran talks as potential triggers for a broader policy shift by Beijing. The July increase suggests that shift is now underway.spglobal