Cushioning Effect of China's Crude Oil Procurement Pause May Be Fading
Taylor Wilson
China's crude imports fell over 40% year-on-year in June, with the IEA estimating 41 million barrels drawn from stockpiles; that pause buffered global prices, but the cushion is running thin just as Gulf shipping faces fresh disruption.
Why did China suddenly stop buying?
The IEA estimates China drew about 41 million barrels from domestic stockpiles last month, while imports dropped more than 40% year-on-year.
This means → China didn't stop needing oil — it was living off savings, burning through crude it had already stockpiled.
In plain terms = China stepped out of the global bidding war, freeing up cargoes for Europe and other Asian buyers and keeping prices from spiking further.
How long can China's stockpiles last?
The U.S. EIA estimates China's strategic reserves grew by roughly 1.1 million barrels per day in 2025, reaching nearly 1.4 billion barrels by year-end.
Goldman Sachs puts China's total oil inventory at about 1.9 billion barrels — enough to cover roughly 117 days of demand.
But at a drawdown rate of about 2 million barrels per day, stockpiles are falling fast — running counter to Beijing's long-term goal of maintaining strategic reserves. This means → the "live off savings" mode has a hard expiry date.
What signals point to China returning to the market?
Saudi Arabia and other Gulf producers have cut official selling prices for July and August cargoes; cheaper Middle Eastern crude is a strong draw for refiners.
Beijing has also approved a sharp increase in July refined-product export quotas, letting private refiners resume shipments — more exports mean refiners need more crude.
Data from commodity analytics firm Kpler shows the quota expansion will further drive China's crude purchasing demand back up.
Why is the timing of China's return dangerous?
After a mid-June interim U.S.–Iran deal, Gulf exports briefly recovered to over 80% of pre-conflict levels; but fresh attacks on the Strait of Hormuz this month have pushed flows back below 50%.
This means → China's demand revival and a renewed Gulf supply squeeze are converging — the world's largest buyer is returning just as available cargoes shrink.
Goldman warns that even if tensions ease, shipping companies remain wary of key routes, so export recovery could be slower than last time.
Where does that leave oil prices?
Kpler senior crude analyst Naveen Das: "The market's eyes immediately turn to the global demand valve — China — for clues on where oil prices go next."
Goldman's base case: Brent at $80 per barrel in Q4, falling to $75 in 2027.
But Goldman also warns: if Gulf export flows fail to recover, prices risk breaching $110 per barrel this year. In plain terms = a $30-per-barrel gap between the base case and the tail risk — that spread alone signals how uncertain this market is.
Content is for reference only, not financial advice.