China has significantly increased its crude oil reserves this year. Crude import volumes from the world’s largest importer have remained relatively strong despite tepid demand and a looming spike in demand for road transport fuels.
China’s crude reserves have supported international oil prices to the range of $60 to $70 a barrel, despite trade wars, concerns about the economy and rising supply from both OPEC+ and non-OPEC+ exporters.
But supporting oil prices has not been China’s reason for stockpiling crude in storage tanks.
The market, industry executives and analysts have taken notice of the stockpiling and suggested several reasons why the world’s largest crude oil importer is buying much more crude than it currently consumes.
The huge accumulation of crude oil stocks in China
Unlike the United States, China does not report inventories. Analysts are looking at overall supply (domestic production plus imports) and refinery processing rates to estimate how much crude goes into strategic or commercial reserves and how much is processed into fuels.
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After a slow start to the year, China began increasing its crude oil imports in March-April and has maintained high import levels since then. According to analysts, the key factor has been the accumulation of crude oil, not a significant rebound in demand.
Increased Chinese purchases have helped support oil prices despite OPEC+ production increases and lingering concerns about the growth rate of global oil demand amid inconsistent U.S. trade policies and tariffs.
Starting in March, “we started to see a very impressive rate of accumulation, close to a million barrels per day,” Frederic Lasserre, global head of research and analysis at commodities trading giant Gunvor, told the audience at the APPEC 2025 conference in Singapore last month.
China will continue to accumulate crude oil in strategic and commercial reserves well into 2026, according to Lasserre. The fill rate is around 60%, suggesting China has room for additional inventory storage, Lasserre said.
China’s significant storage this year has been supported by a new Energy Law, enacted in January 2025, aimed at improving its energy security, the International Energy Agency (IEA) said last week.
“With limited storage capacity available in the country’s strategic petroleum reserves (SPR), oil companies are now mandated to increase oil stocks at their own commercial storage facilities, effectively positioning private companies as long-term strategic storage partners for the government,” Toril Bosoni, Head of the IEA’s Petroleum Industry and Markets Division, wrote in a commentary on the glut. of global oil.
China has room to increase its stocks and is also expanding its crude oil storage capacity, expecting to build 11 new storage sites in the next two years.
China’s reasons for accumulating crude oil
Analysts have pointed to several factors driving the rise in Chinese reserves.
Earlier this year, falling oil prices and high uncertainty over trade, geopolitics and the trade clash with the United States led China to accelerate the filling of its deposits.
The huge monthly stock increases began in April, when uncertainty and lower oil prices prompted aggressive stockpiling by large Chinese companies, while sanctioned crude imports remained near record levels, Emma Li, chief market analyst at Vortexa, said in early May.
China has also been stockpiling crude from sanctioned exporters Russia and Iran. That crude oil is cheaper since it is offered at discounts to the few willing buyers, China being the largest of all. Beijing has been buying crude oil as cheaply as it can amid uncertainties over the US sanctions regime towards Iran and Russia.
Cheaper crude and lower oil prices compared to last year’s levels have been economic incentives for China to increase stockpiling.
Energy security has also been at the top of the list of reasons why China is interested in increasing crude oil storage.
In recent months, other theories about China’s stockpile have emerged, Robin Mills, chief executive of consultancy Qamar Energy, wrote in The National this week.
One of the two most outlandish theories, according to Mills, is that China is preparing to resist some kind of conflict and an oil embargo or disruption of supply through key routes from the Middle East to Asia.
Then there is the theory that China could be preparing for an imminent invasion of Taiwan. This theory was put forward as a “conspiracy theory” by Li-Chen Sim of Khalifa University at the DMCC Energy Club seminar in Dubai last week.
According to Qamar Energy’s Mills, “an invasion of the island very soon seems unlikely.”
For China’s reserves, growth appears to have stalled, Vortexa’s Emma Li said in an analysis last month.
Much of the overall growth in China’s crude oil imports is driven by reserve storage rather than actual consumption, with underlying refining demand virtually flat (or even weaker in some months) compared to last year, when there was no SPR mandate, according to Li.
However, construction at state-owned refineries appeared to have stalled in the third quarter, while inventories in Shandong, home to independent “teapot” refineries, continue to rise with steady flows from Iran, Vortexa data showed.
Until new storage in China becomes available next year, room to build up stock could be limited.
“In summary: China’s crude stockpile growth appears on track to stabilize, leaving imports more closely tied to underlying demand trends than storage issues in the coming months,” Li said.
By Tsvetana Paraskova for Oilprice.com
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