A new report from ANZ suggests that the global oil market could face tighter conditions if China ramps up its crude imports in the coming months. While US inventories and reduced Chinese imports have helped ease pressure, falling refinery activity and rising domestic demand constraints may shift the balance.
China's Reduced Imports and Market Impact
According to the report, China's crude imports dropped from approximately 12.5 million barrels per day (mb/d) to around 2.5 mb/d following the closure of the Strait of Hormuz. This reduction has resulted in an estimated cumulative savings of over 60 million barrels compared to pre-escalation levels. The report states, "Assuming imports would have stayed at the levels they were at prior to late February's escalation of the Middle East conflict, the cumulative amount saved by China's reduced purchases is more than 60 mbbl."
Demand-Side Factors
Soft manufacturing activity, combined with increasing electric vehicle adoption, reduced domestic flights, and constrained petrochemical feedstock imports from the Middle East, have likely cut China's oil demand by around 1 mb/d over the past month. The report notes, "This has been exacerbated by a slowdown in refining activity, reflecting high crude premiums, elevated freight and insurance costs, and issues over refining and inventory valuation losses." However, it adds that this trend is not expected to be long-term, with a gradual rebound in mobility and feedstock flows anticipated.
Inventory and OPEC Supply
China has increasingly drawn on its own oil inventories. The market's ability to absorb the extra OPEC supply in 2025—after the organization reversed 2.2 mb/d of production cuts—was largely due to China absorbing the surplus. The report estimates that China's stockpile has grown by 190 million barrels since the beginning of 2025, now sitting at around 1.7 billion barrels.
Future Outlook
China appears to have managed the supply shortfall primarily by reducing refinery run rates rather than heavily tapping strategic reserves. However, this approach cannot last indefinitely. The report warns, "Any shift in this dynamic will have major repercussions for the oil market. If China is reluctant to dip heavily into its strategic reserves, we should see imports rise in coming months, which could further tighten the physical market."
