China’s Oil Buying Pause Won’t Last Forever

China has been cited as an example of a country that has managed to insulate itself relatively well against oil crises. With over a billion barrels in estimated inventories before the war in the Middle East started, China was the poster child of forward planning in energy security. But this could change, and if it does, it would make an already severe crisis even worse.

Kpler sounded the alarm about that prospect earlier this month, reporting that Chinese refiners have reduced their purchases of oil from overseas because of the price surge caused by the war between the U.S. and Israel and Iran, effectively reducing China’s role as a participant in international price-setting.

Indeed, per Kpler, Chinese oil imports have fallen more substantially than refiners’ run rates amid the energy price jump, suggesting they were relying more on oil from inventories. But demand is not falling fast or sharply enough—and this means China may have to start importing more again, which would lead to a sharp, possibly unpleasant price correction given the overwhelming bearish sentiment that still grips oil markets.

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China’s crude oil imports this month are estimated at 6.78 million barrels per day, Kpler’s senior crude oil analyst Muyu Xu reported this week. This would be the lowest monthly oil import figure in close to ten years and a sharp drop from April’s 8.5 million barrels daily. For more context, Kpler’s analyst noted that China’s average daily oil import rate last year was 10.66 million barrels. About a million barrels per day of that 2025 average went into storage, which is now being drawn to satisfy domestic fuel demand and exports.

Refinery rates in the country are averaging 13.5 million barrels daily, Kpler’s Muyu said, which is down by 154,000 barrels daily from April and also down by over 1.9 million barrels daily from 2025. But consumption of oil products is notoriously resilient. Despite some demand destruction from international oil prices, China remains a massive consumer of the commodity—and its government likely has no intention of letting its oil in storage fall to a dangerously low level. Which means imports will eventually begin to rebound.

Interestingly, earlier oil flow figures for China showed that despite a drop in imports—down 20% on the year in April—Chinese oil buyers continued to set aside some crude for storage. While the average daily imports for last month stood at 9.25 million barrels, down by a significant 2.4 million barrels from a year earlier, refiners put an estimated 430,000 barrels daily into storage to keep the supply shock cushion in good condition, per Reuters’ energy columnist Clyde Russell. Other estimates peg the recent additions to the storage cushion even higher, at 580,000 bpd for April, per Vortexa.

Earlier estimates of China’s oil in storage ranged from 1.2 billion to 1.3 billion barrels. The amount was seen as sufficient to last four months, according to Rush Doshi, director of the China Strategy Initiative at the Council on Foreign Relations, who told CNBC in March that “China has taken the last 20 years to reduce some of its dependence on maritime oil flows.”

A lot of this buffer has come from Russia and Iran, but the price of these sanctioned crude barrels is also up after the United States issued sanction waivers to put a lid on prices. Kpler’s Muyu notes that Chinese oil buyers have fewer buying options than their peers overseas due to a retaliatory 22.5% tariff on U.S. crude and restrictions on Venezuelan oil buying. Not only this, but the U.S. waiver on Russian crude only covers oil loaded before April 17, the analyst pointed out, and that is about to run out sometime around mid-June.

There is also intense competition from India for Russian barrels covered by the sanction waiver, Muyu also noted, further limiting Chinese refiners’ options. For now, there is oil in inventory, but not for very long. Per Kpler, some so-called teapots have enough crude until early June. With prices where they are, even with the latest dip on ceasefire news, crude is much more expensive than it was before the war. This means teapots may have to cut run rates further, freeing up space for state-owned refiners—which also face a limited choice of suppliers. And Beijing would not like to see its oil inventories draw down too much.

This basically means Chinese refiners will be returning to global markets before long—just when the worst of the Middle East crisis hits, which the IEA warned could happen in July or August, with its secretary-general calling it “the red zone” for oil supply. In other words, Chinese oil buyers may start ramping up purchases at the worst possible moment in terms of available and accessible supply.

By Irina Slav for Oilprice.com

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