China continues to stockpile oil

China is continuing to build up its strategic crude oil reserves. For several months now, it has been refining less than it imports and produces, which means it is storing the surplus. As the world's largest importer, its choices have a strong influence on oil prices.

Beijing still has considerable leeway: its onshore reserves are currently 63% full, according to Reuters. The country can therefore take advantage of periods of low prices to buy at a good price, or draw on its stocks when prices soar.

It takes about two months between the order for crude oil and its registration as an import in Chinese ports. In other words, an increase in imports today reflects a purchase decision made two months earlier, at an older price.

Furthermore, China does not pay the price of oil at the rate quoted on international markets. It benefits from significant discounts thanks to its massive purchases from Russia and Iran, whose exports are sanctioned by the West. China is one of the few countries, along with India, to accept these shipments and, above all, to be able to absorb such quantities.

A strategy of strategic accumulation

January–February:
For the first time in 18 months, China drew on its reserves. Refineries processed 30,000 bpd more than the volumes from imports and local production to meet domestic demand.

March:
A record month in terms of imports and orders, with the latter being placed en masse in January to take advantage of prices considered favorable. This resulted in a surplus of 1.89 million bpd, the highest since June 2023. In other words, China imported far more than it refined.

April–May:
The trend continued with an average surplus of 1.4 million barrels per day over the two months, marking a third consecutive month above 1 million barrels per day.

June:
Imports are expected to rise sharply, driven by lower prices linked to trade tensions in the spring. According to Reuters, this increase is primarily aimed at capturing low-priced crude, rather than responding to a recovery in demand.

Oil at bargain prices

According to Reuters, most of this increase in purchases is due to increased purchases of Iranian and Russian oil, which is being offered at discounted prices. Chinese refiners are also anticipating tougher US sanctions on ships and buyers, which is accelerating orders.