Abstract: The paleoclimate of Yining depression is analyzed by rock assemblage and paleontological characteristics. In combination with the analysis of the paleoclimate of Yining sag and the trace element characteristics, it is confirmed that the middle Permian in Yining sag is a hot and dry saline water sedimentary environment, which has the geological conditions for the formation of gypsum bearing strata. A set of gypsum bearing strata with a thickness of about 50 m is found in the field outcrop and drilling data, which is of good preservation conditions for hydrocarbon accumulation in Yining sag. A set of high abundance and high-quality source rocks, mainly from plankton and algae, are developed in the underlying strata of the gypsum bearing strata, with a large number of geological conditions for hydrocarbon generation. Meantime, the gypsum bearing strata have a good sealing effect on oil and gas. Comprehensive analysis shows that the underlying strata of the gypsum bearing strata are the favorable strata for oil and gas production, migration and accumulation, and accumulation, and also the key strata for oil and gas exploration of Permian in Yining sag.