China’s plunging oil imports prevented a
bigger price spike after the Iran war broke out, but its crude purchases are now
ticking up again
1.
Chinese
crude imports show early recovery
o China is beginning to increase crude oil
purchases after several months of subdued imports during the US-Israel war on Iran.
o The rebound could reduce an important
buffer that had helped limit the rise in global oil prices.
2.
August
imports rise 6.2%
o China's crude imports increased 6.2% month-on-month in
August to 37.9 million
tonnes.
o This was the highest level in four months,
but remained more than 23%
below August 2025.
3.
September
imports also recovering
o Kpler estimates China's September crude imports
at 7.84 million bpd,
compared with 7.25 million
bpd in August.
o However, September imports remain well
below the 9.76 million bpd
recorded a year earlier.
4.
Shift
in sources
o China's imports from Iraq have surged from 177,000 bpd in August to more than 1
million bpd in September.
o At the same time, purchases from Iran and Saudi Arabia are expected to
decline.
5.
Middle
East and Russia supply risks
o The rebound comes amid renewed supply
uncertainty caused by:
§ Attacks on Saudi Arabia's East-West pipeline.
§ Ukrainian attacks on Russia's Novorossiysk export terminal.
o These disruptions have increased concerns
over crude availability and put upward pressure on prices.
6.
China
had deliberately reduced imports
o From April to August, China's crude imports were
approximately 3.2 million
bpd below the previous year's level.
o Chinese refiners had been drawing down
inventories rather than purchasing aggressively.
o Growing adoption of new-energy vehicles also
reduced oil demand.
7.
The
China oil buffer is weakening
o Chinese crude inventories declined from
approximately 1.25 billion
barrels in April to 1.14 billion barrels in September,
according to Kpler.
o This reduction means China has less
capacity to continue absorbing supply disruptions through inventory drawdowns.
8.
China's
renewed buying adds price pressure
o Analysts said the earlier weakness in
Chinese purchases had helped offset part of the global supply shortfall and
restrained upward pressure on oil prices.
o The return of Chinese buyers is now
contributing to recent gains in global crude benchmarks.
9.
Large
reserves still provide protection
o China is not expected to return immediately to pre-war import levels.
o Analysts estimate that existing stocks can
cover more than 80 days of
demand.
o Including commercial and strategic
reserves, another estimate puts available inventory at around 4–6 months of consumption.
10. High prices discourage aggressive
restocking
o Brent and WTI rose by more than 20% from late August,
approaching US$110/barrel
on Tuesday, before falling to around US$100/barrel on Friday.
o At these prices, Chinese refiners face
weaker margins.
11. Refining margins under pressure
o Analysts said higher crude prices are
eroding Chinese refining margins while domestic product prices are regulated
above approximately US$80/barrel.
o With crude prices remaining above US$100/barrel, Chinese
refiners are unlikely to substantially accelerate purchases.
12. China remains price-sensitive
o Weak domestic demand and elevated crude
prices make aggressive inventory rebuilding less attractive.
o A prolonged disruption to Saudi exports
could further raise crude prices and squeeze Chinese refinery margins.
13. Possible refined-product response
o If supply disruptions persist, Beijing
could potentially tighten
refined-product exports to ensure adequate domestic supplies.
China's crude imports
are recovering but remain
substantially below last year's levels. The decline in Chinese
inventories means the “China
buffer” against global oil-supply disruptions is becoming weaker.
However, substantial remaining reserves and high crude prices are likely to
prevent a rapid return to pre-war import volumes.
China
is showing early signs of stepping up imports of crude oil after months of subdued
buying amid the US-Israel war on Iran, threatening to erode a buffer that has helped
prevent a larger surge in global oil prices.
But
analysts do not expect China to quickly return to its pre-war import levels, as
elevated crude prices could squeeze margins for Chinese refineries and the country’s
stockpiles are still large enough to last for several months.
Signs
of a rebound in Chinese demand emerged in August, when China’s crude imports rose
6.2 per cent compared with the previous month to hit 37.9 million tonnes, according
to Chinese customs data. The figure was the highest import level seen for four months,
though still more than 23 per cent lower than a year earlier.
The
recovery has continued this month, with China’s crude imports running at 7.84 million
barrels per day (bpd) in September, up from 7.25 million bpd the previous month,
according to trade intelligence firm Kpler. A year ago,
the figure was 9.76 million bpd.
The
uptick in Chinese purchases has come amid renewed turbulence in the oil market,
as the conflicts in Ukraine and the Middle East cause further disruptions to global
supplies. According to Kpler, China’s imports from Iraq shot up from 177,000 bpd
in August to over 1 million bpd this month, but its purchases from Iran and Saudi
Arabia are set to decline.
“A
recent partial rebound in Chinese import demand coincided with increased uncertainty
regarding crude oil supply availability from the Middle East – following attacks
on Saudi Arabia’s East-West pipeline – and Russia due to Ukrainian attacks on the
Novorossiysk export terminal,” said Ivan Ryabov, head of oil trading analytics at
Kpler.
“As
two major exporters with remaining spare crude production capacity, these disruptions
created upwards pressure on prices and raised supply security concerns for importing
countries.”
Chinese
firms “have held back on buying for several months, but have come back to the market
to reduce their drawdown rate and support increased crude runs to replenish domestic
product inventory”, said June Goh, a senior oil market analyst at Sparta.
The
return of Chinese buyers comes after months of weaker imports, which helped partly
offset a global supply shortfall and limit upwards pressure on prices after the
outbreak of the Iran war.
China’s
crude imports from April to August were about 3.2 million bpd lower than a year
earlier, largely because refiners drew on inventories and consumers increasingly
switched to new-energy vehicles, according to a report by Huatai Securities published
on Tuesday.
But
that China buffer is now weakening as inventories fall.
China’s
vast crude oil stockpiles have been declining since April, with inventories falling
from about 1.25 billion barrels to 1.14 billion barrels in September, data from
Kpler showed.
“China’s
oil inventories have fallen significantly from the levels built up before the Strait
of Hormuz closure, making it harder to sustain the ‘China buffer’ that had helped
keep oil prices in check,” the Huatai Securities report said.
Goh
agreed that China’s muted crude buying in recent months had helped contain upwards
pressure on oil prices, while its return had partly contributed to the recent gains
in global oil benchmarks.
“Now,
the crude market cannot rely heavily on China to rebalance again,” said Sun Jianan,
a senior oil analyst at Energy Aspects.
Even
so, analysts do not expect Chinese buyers to return to the market aggressively.
“We
see no imminent risk to China’s crude supply,” Sun said, adding that China still
had ample crude stocks that could meet more than 80 days of demand and cushion potential
supply losses.
Goh
estimated that China still had around four to six months of inventory at current
consumption rates, when factoring in both commercial and strategic reserves.
Global
oil benchmarks such as WTI and Brent rose more than 20 per cent from late August
to nearly US$110 a barrel on Tuesday, before falling back to about US$100 a barrel
on Friday.
Higher
prices are one reason Chinese refiners are unlikely to rush to rebuild inventories.
“Higher
crude prices are now eroding Chinese refining margins, as domestic product prices
are regulated above US$80 per barrel,” Sun said, adding that he did not expect China
to “significantly increase crude purchases with flat prices above US$100 per barrel”.
Similarly,
Terine Ooi, associate director of energy markets at Dow
Jones Energy, said she did not expect China to quickly return to pre-war import
levels.
“Chinese
buyers remain highly price-sensitive, particularly when domestic demand is weak,”
Ooi said. “At current elevated crude prices, aggressive restocking becomes less
attractive and could move the market against China’s own interests.”
A
prolonged disruption to Saudi exports could push up crude prices and further pressure
refiners’ margins, while Beijing could also tighten refined-product exports to prioritise
domestic supply, she added.