China's Crude Oil Stockpiling Strategy
The global crude oil market has been experiencing higher-than-expected prices despite OPEC and its allies increasing production. This is primarily attributed to China, the world's largest oil importer, which has been significantly stockpiling crude oil, thereby absorbing additional global oil supply.
Stockpiling Details
- China has been storing nearly 160 million barrels of crude oil in the first nine months of 2025.
- This stockpiling involves both state-owned and private or independent refiners.
- Experts expect this trend to continue into 2026.
Reasons for Stockpiling
China's motivations for stockpiling crude oil are largely strategic, rooted in energy security amid geopolitical uncertainties.
- Potential risks from Western sanctions against major suppliers like Russia and Iran.
- Ongoing trade tensions with the US, including the tariff war.
- Concerns about a possible invasion of Taiwan.
- Subdued oil prices, which have remained under $70 per barrel since April.
Storage Capacity
- China’s crude storage capacity has grown from 1.4 billion barrels in 2015 to 2.03 billion barrels by the end of 2024.
- An additional 124 million barrels of capacity are expected to be added by the end of the current year.
- Over 40% of China’s oil storage capacity is estimated to be empty, with more capacity expected in the future.
Geopolitical Factors
China purchases a significant portion of its oil from sanctioned countries like Iran and Venezuela, as well as from Russia.
- The Trump administration has hinted at tougher sanctions which could disrupt supplies, prompting China to import and store more oil preemptively.
- China's large stockpile would enable it to manage oil imports efficiently based on supply and price fluctuations.
- Trade tensions with the US have disrupted China's import of petrochemical feedstocks, leading to more reliance on crude oil that can be locally processed.
Potential Implications of Stockpiling
- There are speculations that China's stockpiling could be in preparation for a possible conflict with Taiwan, which could lead to sanctions and blockades impacting its energy supply.
- China may continue stockpiling as long as geopolitical risks and economic incentives persist, such as lower oil prices due to a growing crude surplus.
Future Outlook
Although China's stockpiling has slowed recently, it is largely due to limited import quotas for independent refiners. Industry projections suggest China will increase its oil stocks again in 2026, albeit at a slightly reduced scale compared to 2025.