China's independent oil refiners have cut operating rates to a nine-year low, with run rates at so-called teapots falling to 50.5% in the week to June 21. This marks the weakest processing levels since 2017, dropping even below pandemic-era lows as the country's smaller refiners struggle with multiple headwinds.

The decline reflects the lasting impact of the US-Iran war on China, the leading importer of Iranian crude. These teapot refiners, which process roughly 20% of China's oil, now face constrained access to cheaper Tehran supplies amid ongoing geopolitical tensions that have reshaped global trade flows.

High feedstock costs, weak domestic fuel demand, and stricter export controls on petroleum products have squeezed profit margins across the sector. Refiners are responding by scaling back operations rather than absorbing losses, with many running at half capacity or less during what should be peak seasonal demand.

The reduced activity signals continued stress in Asia's largest oil-consuming economy, potentially reshaping global trade patterns as China seeks alternative supply sources. Analysts expect the pressure on margins to persist through the summer unless demand recovers or feedstock costs ease significantly.