China is set to begin expanding its crude oil reserves starting in November. Analysts suggest that if China increases its oil purchases on the international market, it could exert additional upward pressure on global oil prices.
Consulting firm Eurasia Group reported on October 15 that Chinese refiners are expected to increase their crude oil reserves by an average of 400,000 barrels per day from November through April. Last year, China's average daily crude oil imports were 11.55 million barrels, meaning the planned increase represents about 3.5%. While this figure is not overwhelmingly large in the context of total imports, it is significant enough to impact the supply and demand dynamics of the international oil market.
If China purchases an additional 400,000 barrels daily over six months, the cumulative increase in reserves would amount to approximately 72 million barrels. Given the escalating conflicts in the Middle East and the onset of the heating season, which typically raises global oil demand, the expansion of reserves by Chinese refiners could potentially lead to a surge in international oil prices.
Since the outbreak of the U.S.-Iran conflict in late February, China has been utilizing existing crude oil reserves held by refiners to address supply disruptions and high prices. This strategy has allowed China to reduce imports while consuming its reserves, alleviating the pressure to buy expensive oil on the international market. Recently, there have been signs of a partial recovery in Middle Eastern oil supply, leading to an increase in crude oil imports by Chinese refiners.
According to Eurasia Group, while Chinese refiners have utilized their reserves during the conflict, the government’s strategic reserves, equivalent to about 120 days of oil imports, have not yet been tapped. Since April, China has centralized its crude oil reserve management and extended the mandatory reserve replenishment period for refiners from the previous 1-2 months to 3-5 months.
The Chinese government is expected to prioritize domestic fuel supply stability over export revenues. As a result, it may delay finalizing export quotas for petroleum products or impose restrictions to manage domestic supply. China's move to expand its reserves is emerging as a variable that could influence not only international oil demand but also the Asian petroleum products market.
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.