Despite major oil producers’ grouping OPEC and its allies raising production by reinstating output that was curtailed earlier, the sense among industry watchers is that crude oil prices have stayed at levels higher than what would be normally expected in the prevailing market situation. The reason, they say, is the world’s largest oil importer China, which has been heavily stockpiling crude and thereby absorbing additional global oil supply.
According to some estimates, China put nearly 160 million barrels of crude—worth over $10 billion—into storage in the first nine months of 2025. The purchases were made by China’s state-owned refiners as well as private or independent refiners. And oil industry analysts and experts expect the trend to continue well into 2026.
But why is China stockpiling so much crude, particularly when markets are expected to be well-supplied in the coming months?
Like with various Chinese policies, Beijing has not publicly spelt out its reasons, and its oil sector is not exactly transparent. Experts and analysts say that for China, the reasons are likely rooted in the quest for energy security amid the prevailing geopolitical volatility, risk of tougher Western sanctions against suppliers Russia and Iran, the China-US tariff war, and even the possibility of a Chinese invasion of Taiwan. And all that in a subdued oil price environment—prices have largely stayed under $70 per barrel since April.
Had China not gone on its stockpiling overdrive, international oil prices would most certainly have dropped lower.
China’s growing storage capacity, subdued oil prices
China is known to take a very long-term view on key commodities, and given oil prices have been rather subdued this year and the fact that China has a lot of unutilised—and still growing—storage capacity, Beijing appears to be taking a strategic view from the lens of energy security.
As part of its energy security endeavour, China’s total crude storage capacity has risen from 1.4 billion barrels in 2015 to 2.03 billion barrels by the end of 2024, while a further 124 million barrels of capacity is expected to be added by the end of this year, international research and energy intelligence firm Rystad Energy said in a recent note. And there is more to come in the future.
In January, a law was passed requiring state as well as private refiners to maintain government-supervised “social responsibility” reserves, as per reports.
But wouldn’t it be better to buy when prices go even lower in the coming months, as is expected by the market?
Some experts believe that given the long game China is playing, it may continue opportunistic buying as long as prices remain below a certain level; it can rapidly ramp up imports if they fall further. Also, sentiment in commodity markets can shift quickly as there are various variables. For example, hopes of even lower oil prices could vanish if OPEC and its allies—together referred to as OPEC+—change their strategy and start curtailing production again, or if Western sanctions are significantly tightened against suppliers like Iran and Russia, from whom China buys a lot of oil.
Over 40 per cent of China’s oil storage capacity is estimated to be empty still, and more is set to come up. So, storage space is not going to be a limiting factor. According to a recent report by Reuters, Beijing may be looking to grow its stockpile to cover six months of oil imports, or roughly 2 billion barrels.
Some analysts believe that having such huge stockpiles will also give China enough elbow room to manage oil imports more efficiently depending on the supply and price dynamics. It can stockpile crude when prices are lower and draw from those reserves when demand as well as prices are higher.
Geopolitics: Sanctions risk, trade war, conflict
It is no secret that China buys about a fifth of its oil from the likes of Iran and Venezuela—countries that have been sanctioned by the US, or from Russia, where, at least formally, a price cap is in place. Despite the curbs, China has managed to keep a healthy flow of oil from these countries, particularly Iran and Russia. The Donald Trump administration has signalled tougher sanctions against these countries, which could potentially increase risks for the Chinese independent refiners, and disrupt supplies.
“…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,” Rystad Energy said.
And China is expected to continue buying oil from these countries till it can, with part of those volumes meant for stockpiling rather than immediate processing at its refineries.
The ongoing trade tensions between the US and China are also seen as a factor in shaping China’s stockpiling strategy. China depends heavily on imports for ethane and propane, which are key petrochemical feedstocks. It was importing substantial volumes from the US, but the trade war has significantly disrupted those flows. With a large oil stockpile, China can balance its petrochemical feedstock imports and reduce import dependence as those feedstocks can be manufactured locally from crude oil.
China’s stockpiling of oil has also led to some speculation in certain sections about the possibility of an invasion of Taiwan. While oil industry analysts and experts haven’t really listed it among the most plausible reasons yet, there are murmurs that it could very well be a factor. China’s aggressive stance and increasing military activity, including exercises, around Taiwan have many believing that Beijing may be preparing for war. If a potential invasion of Taiwan is indeed on the horizon, then stockpiling makes a lot of sense for Beijing.
A conflict would most certainly lead to sanctions and curbs from the US and its allies—like on Russia following its invasion of Ukraine—and could lead to a blockade of the Taiwan Strait, a maritime choke point critical for China’s energy imports. A major disruption or blockade of the Strait could have a debilitating impact on China’s energy supply chain.
Will stockpiling continue next year?
One can never be sure of what exactly China will do, but industry watchers believe that as long as the reasons and conditions due to which China has been stockpiling persist, there is no reason to believe that Beijing will stop. And currently, it appears that those reasons still exist.
There has been a slowdown in China’s stockpiling of oil recently, but that could be because of Chinese independent refiners having limited import quota left. These private refiners have annual oil import quotas, which is more of a tool for the Chinese government to regulate their refinery runs.
According to Rystad Energy’s estimates, China will be building stocks again in 2026, although a slightly lower level is expected vis-à-vis this year.
“We also believe that the drivers of China’s crude stockpiling will remain, especially as geopolitical risks remain,” it said, adding that growing crude surplus in the international market is likely to “drag oil prices lower, providing economic incentives to stockpile”.
In January, a law was passed requiring state as well as private refiners maintain government-supervised “social responsibility” reserves, as per reports.
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