China’s Crude Oil Stockpiling Baffles Markets

Core Insights - China has significantly increased its crude oil stockpiling this year, maintaining strong import volumes despite weak demand and an approaching peak in road transportation fuel demand [1][4] - The stockpiling activity has been noted by market participants, with analysts suggesting various reasons for China's increased crude purchases beyond current consumption levels [2] - China's crude stockpiling has supported international oil prices in the $60-$70 per barrel range, despite challenges such as trade wars and increased supply from OPEC+ and non-OPEC+ exporters [1][5] Crude Stockpiling Dynamics - Unlike the United States, China does not publicly report its crude inventories, leading analysts to estimate stockpiling levels based on overall supply and refinery processing rates [3] - Following a slow start to the year, China began increasing its crude oil imports in March-April, primarily driven by stockpiling rather than a significant rebound in demand [4] - From March onwards, stockpiling rates reached nearly one million barrels per day, indicating a robust accumulation strategy [5] Future Projections - Analysts predict that China will continue to build its crude oil reserves into 2026, with a current filling rate of about 60%, suggesting further room for inventory accumulation [6] - The substantial stockpiling this year is supported by a new Energy Law enacted in January 2025, aimed at enhancing China's energy security [6] - With limited storage capacity in strategic petroleum reserves, oil companies are now required to increase stocks at their commercial facilities, positioning them as long-term strategic partners for the government [7]