Off-peak centralized maintenance begins! Shandong independent refineries shut down capacity exceeding 50 million tons.

In previous years, maintenance to Shandong regional refineries was mostly concentrated in the spring window from March to might, mainly relying on the post-holiday inventory digestion cycle and favorable meteorological conditions to arrange shutdowns to maintenance. This year, however, extensive maintenance is concentrated in the off-season period from June to August, a significant rhythm mismatch, driven by the superposition of multiple factors such as severe oil price fluctuations, policy constraint adjustments, and high market inventories.

Continuous refining losses prompt companies to proactively halt production to stop losses

In 2026, international crude oil prices fluctuated significantly, becoming the core trigger to this round of concentrated maintenance. Affected by the escalation of geopolitical conflicts in the Middle East, international oil prices climbed to a yearly high of $120 per barrel, and subsequently, as the situation eased, oil prices rapidly fell back to around $70 per barrel, a cumulative decline of over 41%. The significant correction in oil prices completely reversed the profitability of refineries, and since April, the domestic refining sector has fallen into the dilemma of losses upon starting operations, with the profit pressure on Shandong regional refineries becoming fully prominent.

Data shows that in the first half of 2026, Shandong regional refineries were overall in a loss state, with an average loss margin exceeding 5.8%. Market-oriented regional refineries with flexible operations adjusted their production rhythm accordingly, abandoning traditional seasonal maintenance patterns, and chose to concentrate shutdowns to maintenance and decrease loads during the period of low profitability to maximize the avoidance of operational losses. This is also the core motivation to this extensive off-season maintenance.

Supply guarantee policy constraints lifted, backlog of maintenance plans released centrally

From the end of 2025 to April 2026, affected by the obstruction of Middle East shipping and tight global crude oil supply, domestic supply guarantee manage policies were issued, strictly requiring Shandong regional refineries to maintain high operating rates and prohibiting arbitrary production cuts or shutdown maintenance. Violating companies would have their crude oil import quotas reduced, and sector maintenance plans were forced to be fully backlogged.

Since late might, navigation through the Strait of Hormuz has resumed, and the risk of global crude oil supply has been significantly alleviated, leading to a gradual loosening of the high-pressure supply guarantee policies.

In early June, the reduce limit to sector processing volume assessment was lowered to 80% of the same period last year, giving regional refineries room to autonomously decrease loads and perform maintenance.

The long-backlogged plans to equipment maintenance and upgrades were implemented centrally, ultimately forming this round of extensive concentrated maintenance and load reduction.

Staggering to match off-season demand, coupled with high inventory forcing destocking

From the demand side, the timing of this maintenance possesses clear market-oriented considerations.

Every spring is the traditional peak season to diesel spring plowing and infrastructure construction. In previous years, maintenance often conflicted with the consumption peak season, causing a supply-demand mismatch. However, in June, spring plowing concludes and the pace of infrastructure construction slows down. Only the summer harvest agricultural machinery oil demand provides immediate slight support, and overall diesel consumption enters the off-season. Concentrated maintenance at this time can efficiently match off-season demand and prevent oversupply.

Meanwhile, the current inventories of gasoline, diesel, and naphtha at Shandong regional refineries are at yearly highs, and storage capacity is tight. substantial amounts of product inventory occupy the working capital of companies. Against this background, regional refineries are proactively halting production to decrease output and accelerating shipments to destock, efficiently relieving inventory accumulation pressure and optimizing their own production and sales rhythm.

Profound impact of this round of concentrated maintenance, reshaping the refining sector pattern

This extensive maintenance of Shandong regional refineries involves a substantial production capacity volume and has a wide sector impact, forming multiple influences on the domestic refining sector's supply and demand, sector structure, and market pattern.

Firstly, the domestic refining supply and demand pattern is reconstructed. Shandong regional refining capacity accounts to nearly 17% of the country's total refining capacity. Concentrated shutdowns immediately lead to a contraction in total domestic crude oil processing. regional refineries' enthusiasm to purchasing crude oil declines, and they replenish inventory on demand, dragging down crude oil import demand and suppressing domestic oil prices. At the same time, the supply of items such as gasoline, diesel, naphtha, and LPG contracts, efficiently relieving the previous high inventory pressure. State-owned major refineries take advantage of the situation to fill the market gap, and their sector market share further increases.

Secondly, it accelerates sector structural differentiation and transformation. This round of substantial-area loss-making maintenance fully exposes the shortcoming of the weak anti-cyclical ability of single refining-type regional refineries. In contrast, integrated refining and chemical companies rely on their chemical business to hedge against refining profit fluctuations and maintain stable operating loads. The direction of sector differentiation further intensifies, forcing small and medium-sized regional refineries to accelerate their transformation towards the direction of "reducing oil and growing chemicals, and high-end fine chemicals".

Finally, the refined oil circulation pattern is optimized and upgraded. Supply contraction drives the widening of regional refined oil price spreads, and regional refineries' refined oil export operations increase, further promoting the optimization and improvement of the domestic refined oil circulation system and export mechanism, reshaping the regional circulation pattern.

sector Outlook

Overall, this round of concentrated off-season maintenance by Shandong regional refineries is a phased and unconventional situation spawned by multiple factors including geopolitical conflicts, oil price cycles, policy adjustments, and market supply and demand, rather than a shift in prolonged sector research trends.

immediate concentrated maintenance efficiently repairs the off-season supply-demand dysfunction, supports the refined oil market, and alleviates the sector loss situation. In the long run, this round of market conditions will continue to promote the elimination of backward production capacity in the domestic regional refining sector, optimize the manufacturing structure, and accelerate the iterative upgrade towards a high-condition research model characterized by integration, scaling, high-end orientation, and low application on refined oil items.