China's Teapots Enjoy Profit Surge Until Oil Supplies Run Out
By Reuters | 12 Mar, 2026

Small independent refiners are enjoying a big profit surge until their crude supplies run out and they're forced to idle until the Mideast conflict ends.

China's smaller independent refiners are maintaining output to cash in on a surge in domestic fuel prices, but may be forced to trim runs from late April as cheap feedstocks from inventories run thin and new deliveries price in the war-induced rally, industry and trade sources said.

Plants in Shandong province, China's hub for smaller refineries known as teapots that make up roughly a quarter of national output, are keeping run rates steady to maximise fuel sales at prices 20%-30% higher since Israel and the U.S. attacked Iran on February 28.

"Runs are stable. We're focusing on lifting the refined fuel prices and maximising sales at higher prices, aiming to reap profits in the month of March for the whole of 2026," said a teapot official.

Many refiners in Asia have been cutting runs to preserve feedstock.

Teapots are capitalising on deeply discounted Iranian and Russian crude bought before the war, when benchmark Brent was around $73 a barrel. Brent is now around $100 after touching nearly $120 on Monday.

"We built some inventories earlier, so the pressure is not that big for the near term," said another Shandong teapot executive.

Ex-factory wholesale prices for 0#diesel stood at 7,840 yuan ($1,142.19) per metric ton on Wednesday, up 37% from February 28, while that of 92-octane gasoline rose 26% during the same period, according to postings by Shandong Dongming Petrochemical, a large independent plant. 

Hengli Petrochemical, a large independent in Dalian in the northeast, is maintaining processing rates at around 105% of its nameplate capacity of 400,000 barrels per day plant, a company representative told Reuters on Wednesday.

Consultancy Oilchem last assessed that Shandong teapots were operating at 54.58% of capacity in the week ended March 5, up 2.89 percentage points on the week, adding that runs may inch up further this week on improving margins. 

Crude oil bought and delivered before February 28 should last one and half months for many Shandong-based plants, according to traders dealing with teapots, but operators may soon feel the pinch of soaring crude costs as the Strait of Hormuz remains effectively shut.

Meanwhile, Chinese demand for refined gasoline and diesel has been declining as its cars, buses, trucks and motorcycles are rapidly becoming electricity-powered, and Beijing's move to ban fuel exports to pre-empt a war-induced shortage will keep a lid on margins, traders said. 

($1 = 6.8640 Chinese yuan renminbi)

(Reporting by Chen Aizhu, Trixie Yap and Siyi LiuEditing by Tony Munroe and Raju Gopalakrishnan)