China builds oil reserves in response to a stockpiling campaign
China has been building oil reserves at an accelerated pace as part of its campaign to increase crude stocks. This urgency increased after Russia's invasion of Ukraine disrupted global energy flows. It also accelerated in this year according to traders, industry experts and public data.
According to sources such as domestic news, government reports, and company websites, state oil companies like Sinopec and CNOOC are planning on adding at least 169,000,000 barrels in storage over 11 sites between 2025 and 2026.
Sources indicate that 37 million barrels have been built. The new sites, once completed, will be able store two weeks worth of China's crude oil imports. This is a large volume, as China imports more than any other country in the world.
Beijing's building of reserves - S&P Global Commodity Insight estimated last month that China had stockpiled 530,000 barrels a day on average so far in 2025 – is soaking up excess global supply, and pushing prices down as the OPEC+ group reduces production. The stockpiling is expected to continue through at least the first quarter 2026, fueled by recent prices below $70 a barrel.
China's dependence on imported oil, mainly carried by tankers is a strategic weakness that Beijing seeks to mitigate with storage, diversification in import sources, and maintaining domestic production. China is also developing rapidly renewable energy, and electrifying the vehicle fleet. Both gasoline and diesel consumption are declining. The overall oil demand will likely peak in 2027.
Construction of its reserve site is increasing. According to research, the new additions planned this year and in the next are almost equal to the 180-190 millions barrels of additional capacity estimated by analytics firms Vortexa or Kpler for the last five years.
China's secrecy regarding its reserves may mean that the list is not comprehensive, and the status of the projects could change.
Beijing constructed its first strategic reserve in 2006. However, its recent push is a result of Russia's invasion of Ukraine 2022, which led to a wave disruptive sanctions against Moscow, and revealed the vulnerability of Beijing’s oil imports.
Traders and analysts claim that Beijing quietly has issued orders to state-owned oil companies since late 2023 to stockpile the fuel. Energy Aspects, a London-based company, cited in July an order for 140 million barrels of oil to be bought for strategic reserves. Deliveries would continue until March 2026.
According to June Goh, a Singapore-based analyst with Sparta Commodities, "China's strategy of stockbuilding has always been a way for it to ensure energy security in a nation that is heavily dependent on crude oil imports."
She said that the geopolitical risks posed by Russia and Iran have increased this year, citing possible conflict-related disruptions.
China is the largest crude oil customer of both countries.
BLURRED LINES
China's government stocks include Strategic Petroleum Reserves (SPR), which were built before 2019, and "commercial reserves", more recent storage.
Experts say that both are emergency reserves. The latter is operated more flexiblely under the supervision of the National Reserve Bureau, allowing state refiners the flexibility to rotate their stockpiles in order to meet commercial requirements.
A law passed in January codified the integration by including both government and commercial stocks in a single definition of national reserves, saying companies should maintain government-supervised "social responsibility" reserves.
According to two sources in the industry who declined to give their names due to the sensitive nature of the issue, all the reserves are managed under the supervision of state oil companies by divisions that are dedicated to managing the reserves. The National Food and Strategic Reserves Administration is the owner of the stockpiles.
According to reports by local state media, the provincial government described two sites in Shaanxi province that are under construction and have a combined capacity of 11,000,000 barrels online as state reserves.
A local state-run media outlet described a site on Hainan Island, where a Sinopec facility of 20 million barrels is under construction, as both a commercial storage area and one that contributes to the national reserve capacity.
Requests for comments from the National Food and Strategic Reserves Administration (NFSRA), Sinopec and CNOOC were not immediately answered.
More to Come
Beijing's latest public update on its storage capacity dates back to 2017, when China's National Bureau of Statistics stated that China had built nine bases with a capacity totalling 228, million barrels.
State media reported in August that the semi-official China Petroleum and Petrochemical Industry Federation had said state reserves storage capacity would increase to over 1 billion barrels – equivalent to three months’ worth of net imports – without providing a timeframe.
This would be in accordance with the International Energy Agency requirement that its members maintain stocks equivalent to at least 90 days' worth of net imports. China, however, is not a member.
According to two sources, Beijing wants to increase its oil stockpile enough to cover imports for six months or 2 billion barrels.
The U.S., which is the largest oil producer in the world and has been a net importer since 2019, held 404,000,000 barrels of crude at the end August.
Kpler, a consultancy, estimated China's total reserves and commercial stock, including state-owned and private companies, to be 799 million barrels in early September. This is 109 million more barrels than the levels of the beginning of 2023.
Vortexa estimated that state-controlled stockpiles including refinery stocks were 735 million barrels. This is a 73-million-barrel-build during the same period.
These private estimates do not include the oil that is stored underground at four SPR sites, which in 2021 will have a capacity of 110 million barrels.
(source: Reuters)
