China has purchased more than 150 million barrels—costing about $10 billion at current prices—above its actual use so far this year. For a country that buys more electric vehicles (EVs) than any other, that demands dissection.
The stockpiling was exceptionally high during the second quarter, when the International Energy Agency (IEA) estimates that China absorbed over 90% of the global stockpiling we can measure. That has helped support prices this year, and with the oil market forecast to move into a huge surplus, whether or not China continues its buying spree—and if so, for how long—is crucial for 2026.
Here, we should admit what we do not know. At the annual Asia-Pacific Petroleum Conference last week in Singapore, oil traders agreed only that China has the capacity to store more crude. Beyond that, “nobody has a crystal ball about the duration of Chinese buying for its strategic storage,” Ilia Bouchouev, a former oil trader and now a senior research fellow at the Oxford Institute for Energy Studies, recently said. Be sceptical of anyone who claims to know what the Chinese Communist Party plans. Instead, I’ll offer some educated guesses about the factors at play. Importantly, Chinese policy is multi-dimensional, so several considerations are probably intertwined.
Let’s start with the simple explanations:
First, opportunistic buying. Chinese commodity officials have demonstrated they are canny traders (look at their copper purchases, for example) with a very long-term view. And oil is cheap. In real terms, adjusted by the cumulative impact of inflation, West Texas Intermediate crude has been changing hands at about the same price as 20 years ago.
Second, the opportunity is moot if one lacks the capacity. For China, the timing was right: Lots of storage has come online recently, and plenty more is available for 2026. Even now, about half of China’s tanks and caverns are empty, according to market estimates.
Third, China has introduced new rules that have effectively added to the storage needs. An energy law enacted on 1 January codifies for the first time strategic storage as a legal requirement for state-owned and private companies. Effectively, the state is sharing the responsibility of stockpiling with the commercial sector, setting the legal foundation for an increase in total oil inventories. That legal change isn’t often discussed, but, anecdotally, it appears to have played a major role in the purchases.
Until here, William of Ockham, the 14th century Franciscan friar who made a mark on the scholarship of reasoning, would probably be proud. Those three explanations are straightforward. All of them are probably true. But, very likely, there’s more to it, including a bit of realpolitik, if not conspiracy theory.
Fourth, China has understood that it needs to boost its oil security in a world where the US is wielding sanctions and tariffs willy-nilly. Today, China buys 20% of its oil from countries under US sanctions—chiefly Iran, Russia and Venezuela. None can guarantee that the US would not be able to, at the very least, hinder that flow in the future. Building more stocks is only prudent.
The only question is what’s enough: Currently, China has inventories equal to 110 days of consumption. If the grapevine in Singapore is right, that could be extended to 140 to 180 days by 2026.
Fifth, does China fear an interruption in supply beyond US and European sanctions? Oil traders who traffic in intrigue utter only one word: Taiwan. For a significant minority in the oil market, the supplemental buying makes sense if Beijing is preparing for military conflict. In this view, the simplest explanation for its crude stockpiling is that it’s gearing up for conflict. For them, Occam’s razor marries easily with conspiracy.
Sixth, China may see oil as an alternative to US Treasuries, a way to reduce its exposure to US assets. Putting, say, $10 billion in 2025 in crude, and perhaps as much again in 2026, is a way to diversify its foreign reserves. After all, Beijing is also buying gold and investing in non-dollar assets.
Put it all together, and it’s difficult to avoid a conclusion: China will probably continue stockpiling oil in 2026 for commercial and strategic reasons, mopping up part of the expected global surplus. Whether one adheres to the Occam’s razor or elaborate guesswork, Beijing has good reasons to store more oil. ©Bloomberg
The author is a Bloomberg Opinion columnist covering energy and commodities.