Despite rising geopolitical tensions, China is not currently facing a crude oil shortage. In fact, it has been steadily building its strategic petroleum reserves throughout 2024. Actual refinery activity remains subdued. Independent refiners posted the lowest utilization rates in five years this June, and state-owned refiners are also running below capacity due to routine seasonal maintenance. As a result, there’s been no significant uptick in physical crude buying yet. The real uncertainty now revolves around the duration and outcome of the ongoing conflict between Iran and Israel.
Might China play a more active diplomatic role in the war?
Unlike previous conflicts where China showed more visible alignment, such as backing Pakistan during India-Pakistan tensions, Beijing’s current posture is more restrained. China is urging peace and promoting dialogue, largely through diplomatic and multilateral channels. Its approach is centered on facilitation, not intervention. When it comes to defending Iran, this is not a strategic partnership that China would go to extremes to protect, despite Iran being a valuable oil supplier. Iranian crude deliveries to China fell noticeably in April and May. Independent Chinese refiners, wary of sanctions risks, scaled back imports.
Why isn’t China still buying oil, given prices might rise?
Peak maintenance season will conclude by late June, and with refinery operations expected to ramp up in July and August, crude demand will follow. Seasonal spikes in gasoline and jet fuel consumption should also boost purchasing activity. But for now, storage capacity is limited. China is expanding its storage infrastructure however. Yanchang Petroleum, for example, is expected to bring a major new storage facility online by the end of June, with others following later this year. This growing storage cushion could support larger imports moving forward.
How much is the U.S.-China trade dispute dragging on economic performance?
It’s not derailing China’s growth. Official data shows continued trade expansion through the first five months of 2025. Nonetheless, a sharp spike in energy prices could pose serious risks to economic stability in the second half of the year. In response, China may implement more stimulus policies and boost exports of refined petroleum products to support growth.