Key Insights for Investors on China’s Crude Oil War Chest Strategy Amid Global Conflicts

China, the world’s largest crude oil importer, is quietly amassing a strategic stockpile, positioning itself to navigate turbulent markets as Middle East conflicts drive price volatility. With surplus crude reaching 1.4 million barrels per day (bpd) in May 2025, the nation’s refineries are processing far less than what’s available from imports and domestic production. This calculated move offers flexibility to curb imports if prices spike further, reshaping global oil dynamics.

Building a Strategic Buffer

China’s crude surplus has climbed steadily, exceeding 1 million bpd for three consecutive months through May 2025. Official data shows refiners processed 13.92 million bpd in May, down 1.8% from the previous year, while imports and domestic output totaled 15.32 million bpd. The resulting 1.4 million bpd surplus likely feeds into strategic and commercial stockpiles, though exact storage volumes remain undisclosed.

For the first five months of 2025, the average surplus stood at 990,000 bpd, a sharp reversal from early-year inventory draws.
This stockpiling aligns with China’s historical pattern of capitalizing on low prices. When Brent futures dipped to a four-year low of $58.50 per barrel on May 5, 2025, refiners ramped up purchases, with June imports projected at 11.72 million bpd. These cargoes, secured at bargain rates, are now arriving, creating an impression of robust demand. Yet, weak refinery throughput reveals a different story: China is hoarding crude, not consuming it.

Middle East Price Shocks

Tensions in the Middle East, particularly Israel’s airstrikes on Iran starting June 13, 2025, have pushed Brent futures up nearly 6% to $73.58 per barrel. While Iran’s oil production remains unscathed, the risk of disruption looms large. China’s refiners, historically price-sensitive, are poised to respond by trimming imports and tapping stockpiles, a tactic seen in past price surges. Given the two-month lag in cargo delivery, reduced imports may not surface until August 2025.

China’s ability to pivot to discounted oil from sanctioned exporters like Russia and Iran further bolsters its resilience. This flexibility could exert downward pressure on global prices, countering the upward momentum from geopolitical risks.

Implications for Global Markets

China’s stockpile strategy has far-reaching consequences. By importing beyond immediate needs, the nation secures energy stability while influencing market trends. A potential pullback in purchases could dampen price rallies, challenging oil-producing nations reliant on high revenues. Conversely, sustained stockpiling during price dips could tighten supply, nudging prices upward.

China’s actions hinge on price trends and geopolitical developments. If Middle East tensions escalate, expect refiners to lean harder on stored crude and seek cheaper alternatives. This approach not only shields China’s economy but also underscores its growing sway over global oil markets. As prices fluctuate, the world watches how this crude war chest shapes the energy landscape.