China’s Fuel Export Curbs Squeeze Asian Markets As Gasoline Margins Hit Record

China's suspension of oil-product exports to destinations outside Hong Kong and Macau is tightening fuel supplies across parts of Asia, pushing gasoline refining margins to record levels and reshaping trade flows for diesel and jet fuel.

The restrictions, introduced this month, are hitting major buyers of Chinese refined products, including Singapore, Malaysia and Australia, hard. While Hong Kong remains exempt, the wider curbs are reducing the volume of Chinese fuel available to international markets at a time when inventories in parts of Asia are already low.

Expectations of tighter Chinese supply drove gasoline refining margins in Asia to a record above $50 a barrel over Brent crude on Thursday. Monthly spreads for gasoil and jet fuel also moved into steeper backwardation, a market structure in which prompt deliveries command higher prices than contracts for later delivery.

The price signals indicate that traders are placing a premium on immediate supplies as they reassess how much fuel will be available from China's enormous refining system.

China is the world's largest refining hub, meaning changes in its export flows can quickly affect regional prices even when domestic production remains high. A reduction in Chinese shipments effectively removes barrels from the international market and forces buyers to compete for alternative supplies from other Asian refiners.

Singapore is particularly exposed. It was the largest recipient of Chinese gasoline during the first nine months of the year, importing 1.772 million metric tons, equivalent to about 14.97 million barrels, according to Kpler data.

That volume was already 62% below the amount imported during all of 2025, underscoring how sharply Chinese gasoline supplies to the market have contracted. The squeeze is occurring alongside low inventories in Singapore, one of Asia's most important oil-trading and refining centers. Stocks of light distillates, which include gasoline, were at their lowest level in five years.

Singapore also plays a critical role in regional fuel distribution because traders blend gasoline there before re-exporting it. Indonesia is the largest destination for those blended supplies, meaning disruption to Chinese shipments can propagate beyond Singapore into Southeast Asian markets.

"We continue to closely monitor developments in China's fuel export policies, which remain dynamic," said Muhammad Baron, a spokesperson at Indonesian state energy company Pertamina.

Baron said Pertamina has a diversified supply portfolio while continuing to support higher domestic production and the development of biofuels to reduce the country's reliance on imports.

Jet Fuel Markets Face A Different Supply Squeeze

China's refined-product export profile makes the restrictions particularly important for aviation fuel.

Jet fuel, also known as kerosene, accounts for the largest share of China's oil-product exports, with much of it shipped to Hong Kong, which remains outside the latest restrictions.

Australia has nevertheless become the second-largest importer of Chinese jet fuel this year, behind Hong Kong and ahead of Vietnam, Japan and Malaysia, according to Kpler. The Australian government moved to reassure the market on Friday, saying the country had 42 days of petrol supply, 110% above its required level, and 29 days of jet fuel stocks, which it described as within normal levels.

The government also said 45 ships were currently heading toward Australia, with 3.5 billion liters of fuel already committed for delivery over the next four weeks.

The immediate exposure is therefore limited, according to Mukesh Sahdev, Sydney-based chief oil analyst at consultancy XAnalysts. Australia's largest fuel import is diesel, which is sourced predominantly from South Korea, Taiwan, Brunei and Malaysia rather than China.

But Sahdev warned that the effects would not necessarily remain confined to Chinese-Australian trade.

"China not putting barrels into the wider market would push prices up for all buyers," he said.

That is the central implication of China's export restrictions. Even countries that do not depend heavily on Chinese fuel can face higher costs if Chinese barrels disappear from the pool of internationally traded supplies. Alternative producers can raise prices as buyers compete for replacement cargoes, while longer shipping distances can increase freight costs.

The tightening market is already visible in the relative pricing of different fuels.

Jet fuel has strengthened against diesel, pushing the so-called regrade, the price difference between the two products, to a premium of around $2 a barrel. That was the highest level since mid-July, according to LSEG data.

Diesel margins subsequently eased on Friday to a three-session low of about $67 a barrel after European gasoil futures declined on expectations that additional supplies could become available.

The move reflects another major development in the global fuel market. European Union countries discussed a French proposal on Friday to release additional diesel stockpiles following t for European governments to make more fuel available and help contain surging prices.

Asian Fuel Flows Are Being Redrawn

China's restrictions are also beginning to alter the economics of international fuel trading. Asian jet fuel prices have risen relative to European prices to such an extent that the arbitrage window for shipments from South Korea and Singapore into Europe has effectively closed, according to James Noel-Beswick, head of commodities at Sparta.

"Three weeks ago every Asian jet arb into Europe was wide open," Noel-Beswick said in a note. "That picture has fully reversed."

The reversal illustrates how quickly changes in one major supplier's export policy can alter global trade routes. When Asian jet fuel prices were sufficiently low relative to Europe, traders could profitably purchase cargoes in Asia and ship them west. Higher Asian prices now eliminate that incentive, leaving more fuel within the region and potentially reducing the supplies available to European buyers.

The effects could become more pronounced if China's restrictions persist or are expanded. Asian refiners may be able to increase production and redirect cargoes, while buyers can turn to suppliers such as South Korea, Taiwan and Singapore. But replacing China's export volumes is not simply a matter of finding equivalent barrels. Refinery configurations, product specifications, shipping capacity, inventories and regional price differences all determine whether alternative supplies can reach the market economically.

That makes China's policy a potentially important variable for global refined-product prices even if crude oil production itself remains unaffected.

For Asian consumers, airlines, transport companies and fuel importers, the immediate concern is the cost of securing replacement supplies. However, the situation presents the opposite incentive for refiners: exceptionally strong margins could encourage higher utilization and additional exports where regulations and available inventories permit.

The market is therefore entering a feedback loop in which China's reduced exports tighten regional availability, higher prices improve refining economics elsewhere, and stronger margins encourage alternative suppliers to increase flows.