Brent M1 futures have remained well above US$65/bbl for most of the last few months, even amid OPEC+’s faster unwinding production cuts since May.?
Why? Because mainland China has put 156 million bbls of crude oil into storage since March this year, with the stock build coming in at a monthly average of 1.16 million bpd from March to June.
Read Rystad Energy’s oil market update from?Lin Ye, Vice President, Oil Markets - Downstream:?
“China’s oil stockpiling goes against the grain as the global oil market has been in firm?backwardation?- where current prices are above future delivery prices - which does not support crude oil storage. Conversely, crude inventories outside China have declined during the same period.
China’s stockpiling has provided a temporary price floor by mopping up excess supply, yet its efficacy is constrained by geopolitical factors, global supply changes and Beijing’s policy redirection.
It is important to note that China’s crude inventory changes are a critical buffer for the global oil market, and not a permanent solution.”Why is China storing crude oil?
Geopolitics: Independents seize opportunities amid fear of tougher sanctions, US tariffs
Continued sanctions on Iran oil exports have matured the trading system, including the use of dark fleets to transport crude oil from Iran to a few Chinese ports, primarily those in Shandong.
Sanctions from former US President Joe Biden's administration on Russia in early January this year added to the overall risks for crude export for?Russia, Iran and Venezuela.
While China’s imports from these three countries were hit hard in January, these began to recover from February and climbed to a new high in March this year as workarounds were discovered.
Yet, in anticipation of tougher sanctions from the west and the release of multiple rounds of sanction packages, Chinese independent refiners – who are typically seen as risk takers – along with all others along the supply chain, took advantage of the opportunity to import as much as possible and stored crude in inventories.
More arrivals of Iranian crude are expected in September, as there are still many barrels awaiting discharge at Chinese ports. China has worked to divert its import origins of natural gas liquids (NGLs) away from the US after the tariff war, even though ethane and propane purchases from the US were exempt from higher tariffs.
However, risks of decoupling of the world’s two largest economies remain.
Imported ethane and propane have offered routes to produce ethylene and propylene alongside imported naphtha and refinery-produced light feedstocks.
A more muted reliance on imported feedstocks intensifies the alternative feedstock demand for crude oil as China’s refining sector has highlighted the technological development – ‘from crude to chemicals’ – as a core task.
Economics: Cheaper crude oil amid lower official selling prices (OSPs)
While discounted crude has been put into inventories since March, oil prices started to tumble in April following US President Donald Trump’s Liberation Day.
The average crude import cost from China customs shows a sharp fall from April, touching $US72.7/bbl – a low not seen since the onset of the COVID-19 pandemic.
The landed cost also slipped below US$70/bbl in the following months amid a slide in Brent prices.
Additionally, Saudi Arabia started to set?lower official selling prices (OSPs)?in April and May after losing its market share in Asia, and supported the comparative advantage of the crude grades that Chinese refineries have been designed to process.
Fundamentals: Heavy seasonal outages, firm demand, energy security, greater refining capacity
April and May denote the heavy maintenance season for China’s state-owned sector, as independent refiners usually avoid this period for their own turnarounds.
Sinopec saw a high outage count in April and May this year, with about 1.2 million bpd of capacity loss.
This also means Sinopec will run harder when its refineries come out of outages.
China has prioritised energy security and plans to expand crude oil storage capacity for many years.
The country’s total crude storage capacity has risen from 1.4 billion bbls in 2015 to 2.03 billion bbls by the end of 2024, while a further 124 million bbls of capacity is expected to be added by the end of this year.
According to the public information on upcoming crude storage projects, China’s crude storage capacity will continue to tick higher despite flattening refinery runs in the country, boosting the nation’s energy security.
The three new refining projects coming online this year, including the Yulong refinery’s second train, Sinopec’s Zhenhai refinery expansion and CNOOC’s Daxie expansion, are driving the crude storage capacity along with refining capacities, adding to the need to fill crude into the inventories.
How long will China’s stockpiling last?
While?China's crude stockpiling?slowed in July and August, the stockpiling expected to gain momentum again in September.
In our base case scenario, 4Q25 will likely see China building stocks again and in 2026, although a lower level of build is expected on average in 2026 compared to this year.
We also believe that the drivers of China’s crude stockpiling will remain, especially as geopolitical risks remain.
Our unsolved balances implied, driven by the quick unwinding of production cuts from OPEC+ and non-OPEC supply growth, the?2.14 million bpd of crude surplus?from 4Q 2025 will drag oil prices lower, providing economic incentives to stockpile.