China Reinstates Fuel Export Curbs, Pressuring Diesel and Jet Fuel Markets

China has again restricted exports of diesel, jet fuel and gasoline, with state-owned oil giants slowing refined-product shipments as domestic crude oil and refined-product inventories have dwindled. Oil analysts in regular contact with the companies say the government has stopped granting new commercial export permits to wider global markets, while shipments to countries with close ties to Beijing, including Cambodia, continue.

China's latest restrictions pushed diesel prices up 5 percent on Wednesday and Thursday in Singapore, Asia's main energy trading hub, even as crude oil prices fell nearly 10 percent. Diesel prices retreated on Friday, returning to approximately $170 a barrel after European countries discussed releasing diesel from strategic reserves. Jet fuel prices have also risen in East Asia, raising the prospect of higher airline operating costs and ticket prices.

The move echoes restrictions Beijing imposed in March, when war in Iran disrupted oil flows through the Strait of Hormuz and a sudden drop in Chinese fuel exports sent Asian countries scrambling for alternative supplies. The curbs arrive as diesel markets are under pressure from other directions too: Russia this week renewed a ban on diesel exports after Ukrainian drone attacks damaged refineries that also supply fuel to Russian forces in eastern Ukraine, a fire at an Indian refinery on Tuesday led its owner to halt some refined-product exports including diesel to prioritize domestic customers, and President Trump has threatened to restrict U.S. diesel exports to reduce costs for truckers ahead of the midterm elections.

This is a supply-chain squeeze arriving from several directions at once: a major exporter pulling back permits, a war-damaged refining base cutting shipments, a refinery fire forcing a domestic-first policy, and a political threat to curb exports in a fourth country. Jet fuel and diesel are refined from the same crude streams and often compete for the same refinery capacity, so a shock to diesel availability tends to spill into jet fuel pricing even when no airline-specific restriction exists.

For carriers operating into or through East Asia, higher jet fuel prices in the region raise the prospect of higher operating costs and, potentially, higher ticket prices, though the pass-through to fares is not something this episode has yet settled. Whether the pressure eases depends on how long Beijing keeps new export permits closed, whether Russian refinery repairs restore diesel flows, and whether the discussed European release of strategic diesel reserves actually goes ahead. Prices already showed how fast this can move, climbing 5 percent over two days in Singapore before partly retreating by Friday, which points to a market still searching for a stable level rather than one that has found it.