China’s gasoline and diesel inventories are plunging as refiners grapple with a tightening domestic market, raising the chance the government may move to limit fuel exports again. Gasoline stockpiles at Chinese state-owned fuel suppliers dropped 2.9% last week to the lowest since 2022, according to JLC International. Diesel holdings declined 2.4% to a 15-month low.

Beijing moved quickly to curb oil product exports in the early weeks of the US-Iran war, depriving Asian buyers of much-needed fuel but also helping to keep a lid on global crude prices. Authorities subsequently eased the restrictions, and shipments of gasoline, diesel and jet fuel, known as clean products, had recovered to a combined 2.55 million tons in July, according to the latest Chinese customs data.

“With the domestic market tightening, we see an increasing risk that Beijing could restrict monthly clean product exports to around 1.2 million tons in the fourth quarter,” said Jianan Sun, an analyst at Energy Aspects Ltd. in London. Chinese independent refiners, meanwhile, have lost access to their favored Iranian crude due to the US blockade, pushing up premiums for oil from Africa and Latin America as buyers scramble for alternatives.

The situation is becoming so dire for the independents, or teapots, that they may have to cut run rates in the coming weeks.