Abstract: Based on comprehensive analysis of geological, seismic, logging and testing data and focusing on three areas of sedimentation, diagenesis and breaking effect, this paper elaborates three main controlling factors of lower lithologic reservoirs of lower Ganchaigou Formation (E₃¹) below Hongliuquan Structure of Qaidam Basin – sedimentary microfacies, cementation and micro faults. The study indicates that the lithologic reservoirs of the E₃¹ in Hongliuquan Structure is not facies controlled and the sedimentary microfacies only controls distribution of sand bodies. Compactness makes the reservoir compact but exerts little impact on horizontal changes in physical properties and oil bearing properties of the reservoirs. Cementation results in sealing in the updip direction of Hongliuquan Structure, leading to a sealing zone along Hong 113 Well, Hong 22 Well and Hong 15 Well. Therefore, oil and gas are accumulated mainly in the middle position of the slope zone. Cementation minerals are mainly anhydrite, gypsum and calcite. Micro fault development zone is the main oil and gas bearing zone in Hongliuquan Structure. The differences in sealing conditions of different micro faults are the important controlling factors for lithologic reservoirs, causing the apparent difference in the oil bearing properties of neighboring wells.