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# Is China Now Incentivised to Stabilise Middle East ?!
- URL: https://bilal-hafeez-notes.ghost.io/is-china-now-incentivised-to-stabilise-middle-east/
- Published: 2026-09-20T15:12:24.000Z
- Updated: 2026-09-20T15:12:24.000Z
- Author: Bilal Hafeez

(I‘m testing a new email distribution plareform!)

There has been chatter that China intervened recently to tell Iran to rein in the Houthis. My piece below on how China has less control over the latest iteration of the war could be why China is getting more involved. 

China has already saved the oil market once this year - it was China's crude import cut during phase one of the US/Iran War that closed more than half of an 8mb/d net supply hole (see Chart and hat tip to Rory Johnston for being on this story early on). But can they do it again with Brent above $100 and crack spreads at record highs. On paper, they could help, but it will likely be a much larger ask than before:

1. China Limited Fall-Out from Phase 1 of War. Gross Gulf supply losses (Iraq, Qatar, Kuwait, UAE, Saudi) hit 10mb/d by IEA's March count; rerouting via Yanbu and Fujairah clawed back \~2mb/d, leaving a net 8mb/d hole. China's 4.5mb/d cut in seaborne crude imports at the June trough covered more than half of that alone - bigger than most OPEC+ members' entire output.
2. China Has Refining Capacity But Not a Panacea. Currently, teapots (China's small, independent refiners, mostly in Shandong) run near 50% utilisation, down from 65% in late 2023; state refiners sit at 73-74% (Chart 3). Normalising both – teapots to 65%, state to 80% – adds roughly 1.6mb/d of crude throughput, less still in exportable diesel and jet once domestic use and product-mix losses are stripped out.
3. Teapots Have Spare capacity – and the Wrong Politics (and Output). Teapots are also the segment Beijing has spent years trying to shrink on overcapacity and environmental grounds - a teapot-led ramp cuts against standing policy. That alone points any real fix toward the state refiners, not the independents sitting on the most idle capacity.

What to watch next: signs of teapot utilisation picking up would help, but the real signal could be a Sinopec/CNPC quota release big enough to matter, the way 30 September 2022 was. Watch Brent as much as the crack: any real refining ramp shows loop up first as higher Chinese crude imports, the one part of this trade that could undo the calm China itself created in H1.

I have more charts on this topic - let me know and I'll send.