China has started distributing the second batch of 2026 crude oil import quotas to independent refiners, with at least one major facility in eastern China receiving its allocation, sources familiar with the matter revealed to Reuters on Tuesday.
More refiners, particularly in the Shandong province hub, expect notifications in the coming days, signaling Beijing’s calibrated approach to managing non-state imports amid stable overall volumes and a focus on demand flexibility.
The unnamed eastern refiner secured a combined 11 million metric tons (approximately 220,000 barrels per day) across the first two batches—equivalent to about 70% of its projected full-year quota. The initial batch, issued in late November, totaled around 8 million tons nationwide and was usable for cargoes arriving by year-end, providing a bridge amid quota exhaustion in late 2025.
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This early release spurred a buying spree among teapots, boosting November crude imports to their highest daily level in 27 months at 12.2 million bpd, as refiners scrambled to utilize the fresh allowances before expiration. Independent refiners—commonly called “teapots,” clustered primarily in Shandong and processing ~20-25% of China’s crude (total imports ~11 million bpd)—anticipate their first two batches will similarly cover 70% of annual allowances, a shift from 2025 when early issuances comprised the full quota.
The reason for front-loading less volume remains unclear, though analysts speculate it allows greater flexibility in response to demand fluctuations, sanctions impacts, or inventory management. Beijing released an additional quota of about 10 million mt to qualified independent refineries for crude imports in 2025 in late November, and the final batch of 2025 quotas totaled more than 7.5 million tons—notably higher than the 6 million tons released in the same period the previous year.
China’s Ministry of Commerce has set the total 2026 quota for non-state firms at 257 million metric tons, unchanged from 2025 and reflecting cautious demand expectations in a slowing economy with 4.7% GDP growth in 2025. This cap covers independent refiners and some private giants, excluding state majors like Sinopec and PetroChina, which import freely.
For 2026, the first batch of fuel export quotas is stable year-on-year, with main recipients being state-owned oil companies Sinopec and CNPC, which received 13.76 million tons of allowances for refined fuels. Independent refiners often favor discounted sanctioned grades such as Russian, Iranian, and Venezuelan, due to price sensitivity, and the quota system, in place since the 1990s, regulates their imports to control refining capacity, fuel quality, and foreign exchange outflows.
Early 2026 allocations enable teapots to plan purchases amid narrowing Russian discounts of $2-4/bbl below Brent and heightened sanctions scrutiny. The November batch spurred a buying spree, boosting utilization rates to over 60% in December and drawing down bonded storage of Iranian crude. Second-batch issuances could sustain this momentum into Q1 2026, supporting sour barrel demand while Beijing manages overcapacity.
Independent refiners exhausted their previous quotas as early as October and were waiting for a new issuance at the end of the year. Shandong teapots, representing 80% of independent capacity (4 million bpd total), have faced headwinds: quota delays, fuel export curbs, and consolidation pressures. Recent revivals—three bankrupt plants resurrected under new owners—highlight resilience, but overall numbers have declined from peaks above 50 refiners.
Stable quotas signal muted growth expectations for 2026 refining throughput, prioritizing efficiency over expansion amid EV adoption and peak oil demand forecasts. Yet, front-loading 70% early provides certainty for discounted sour crude sourcing, potentially stabilizing Asian physical markets. China’s independent refiners boost crude buying after new import quotas, with the total allocation for 2026 set at 257 million tons, the same as a year ago.