China's Cnooc and Shell Petrochemicals Co., jointly known as CSPC, has reached on-specification production at its steam cracker in Huizhou on Saturday, after it was restarted in late April, multiple sources said.

The cracker, capable of producing 1.2 million metric tons per year of ethylene and 600,000 mt/year of propylene, went offline in March as an Iran-related supply shock hit many Asian energy producers, forcing them to cut back operations due to a dearth of feedstocks. CSPC did not respond to OPIS' request for comment at the time of writing.

The restart of CSPC's cracker is one of the latest signs that producers are gradually recovering from the aftershock of Hormuz Strait disruptions, even as the U.S. and Iran work on peace talks while fallback supplies to cover near-term demand have been found outside of the Middle East, although the chokepoint remains largely off-limits.

CSPC's flexible cracker is mostly reliant on imported feeds of naphtha, of which more than half in Asia is supplied by the Middle East. In April, Cnooc was observed to be shipping condensate from its joint venture project in Australia to Huizhou, a move believed by industry sources as likely caused by the naphtha shortage. Condensate shares a similar quality with light crude oil and can be processed through splitters to yield high-value naphtha.

A temporary waiver by the U.S. on Russian cargo sanctions could also provide a buffer to import-reliant crackers, aided by feeds secured in the domestic market, sources said.

"Producers [in China] which have integrated supply chains in oil refining have raised runs in upstream as a measure to counter the Middle East supply shock, although a domestic consumption tax imposed by Beijing [earlier this year] has pushed crackers to consider more imports," said a Singapore-based analyst.

CSPC's restart comes at a time of increased ethylene shipments from China to Southeast Asia due to an oversupply at home, which has also prompted state-owned refiners to pivot towards petrochemicals, as OPIS previously reported.

Meanwhile, a raft of crackers have been heard planning to raise runs in May. For example, the Tianjin Nangang Ethylene Project is considering lifting its cracker operating rate to 80% this month from 70% previously, sources said, citing adequate feedstock secured outside the Middle East.

As such, a softening in fundamentals has already been priced in the broader physical market in Asia. The CFR Japan naphtha cash differential, assessed by OPIS, was pegged at $70/mt on Wednesday, half of the previous high which was fueled by the war-related shortage, according to OPIS data.

The benchmark CFR Japan open specification naphtha price slipped by $71/mt to $971/mt the same day, yet a narrowing H2 June/H2 July spread from $100s/mt to $66/mt backwardation suggests alleviated tightness in the prompt market, the same data shows.

This content was created by Oil Price Information Service, which is operated by Dow Jones & Co. OPIS is run independently from Dow Jones Newswires and The Wall Street Journal.

-Reporting by Yiwen Ju, yju@opisnet.com; Editing by Mei-Hwen Wong, mwong@opisnet.com

(END) Dow Jones Newswires

May 07, 2026 04:41 ET (08:41 GMT)

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