Oil buyers are questioning whether China can continue to restrain oil prices, a role it played effectively for months by drawing down its vast crude oil stockpiles. During a period of significant supply disruption caused by conflict in the Middle East, which impacted 20% of global energy supply through the closure of the Strait of Hormuz, China's reduction in oil purchases prevented a "doomsday scenario" for prices, according to Paul Gruenwald, global chief economist at S&P Global Ratings. Early forecasts had anticipated prices surging to $150-$200 a barrel, but China's actions helped keep Brent crude around $80 a barrel before recent escalations pushed it over $100.
China's strategic crude oil inventories were estimated at 1.4 billion barrels as of December 2025, compared to 825 million barrels in the U.S., including commercial inventories. This substantial reserve allowed China to cut its crude imports significantly, falling below 8 million barrels a day in May and June for the first time since 2016. However, this buffer is facing limits as China's crude imports rebounded 22% in July and 6.2% in August, although still below pre-war levels. The country also holds roughly four months of crude in national reserves, and a new energy law mandates major oil companies to hold additional reserves.
As China's supply options narrow and its refiners increase output, the asking price for Russian ESPO crude for November-loading reached over $20 a barrel above Brent futures, double the premium from the previous week. Chinese independent refiners, known as "teapots," are actively scrambling for supplies from West Africa, Canada, and South America, driving spot premiums up by more than $10 a barrel in the last two weeks. These teapots face challenges from U.S. blockades affecting Iranian and Venezuelan crude, and may cut processing runs due to surging costs and scarcity. If China resumes importing at its pre-war pace, the drag on global economic growth from elevated oil prices could deepen significantly, according to Krishna Srinivasan of the International Monetary Fund.
