The global crude oil market has long been shaped by a simple assumption: producer cartels such as OPEC+ can influence prices by tightening or loosening supply. Developments in 2025 unsettled this belief. China, the world’s largest oil importer, emerged as a quiet but powerful stabiliser of prices by adjusting how much crude it diverted into storage, effectively acting as both a floor and a ceiling for global oil prices.
How China Altered the Traditional Oil Price Mechanism
Traditionally, oil prices responded primarily to production decisions by major exporters. Coordinated output cuts by OPEC+ in 2022 initially pushed prices higher. However, once these cuts began to be unwound from April 2025, the expected price collapse did not fully materialise. Instead, China stepped in by absorbing surplus crude through its storage system when prices dipped, and scaling back purchases when prices rose.
This behaviour challenged the notion that price-setting power rests solely with producers. In effect, China used demand-side flexibility, rather than supply-side control, to shape market outcomes.
Surplus Crude and the Storage Channel
China does not publish official data on its strategic or commercial oil stockpiles. Yet an estimate can be derived by comparing total crude availability—imports plus domestic production—with refinery throughput. For the first eleven months of 2025, China had a surplus of roughly 9,80,000 barrels per day, as crude supply of about 15.80 million bpd exceeded refinery processing of 14.82 million bpd.
This surplus accumulation began in March, following a brief inventory draw in January and February when refiners processed slightly more crude than was available. While not all surplus barrels necessarily went into storage, the trend clearly points to stockpiling beyond immediate consumption needs.
Price Signals and China’s Buying Behaviour
A notable feature of 2025 was the strong correlation between oil prices and China’s surplus crude accumulation. When prices softened, China increased buying; when prices rose, it reduced storage inflows. This pattern was visible around mid-year geopolitical tensions, including the Israel–Iran conflict, when Brent prices spiked above $81 per barrel in June.
By September, when prices were still elevated, surplus crude fell sharply. As prices eased in the following months, Chinese refiners resumed aggressive buying, pushing surplus levels to nearly 1.9 million bpd in November. These counter-cyclical moves helped keep Brent crude prices anchored around $65 per barrel during the latter half of the year.
Strategic Reserves: The Known Unknown
The biggest uncertainty heading into 2026 is the scale and intent of China’s oil stockpiling strategy. Estimates of total stored crude range from 1 to 1.4 billion barrels. If China aims for the international benchmark of 90 days of import cover, around 1 billion barrels would suffice at current import levels.
However, a large share of existing inventories is believed to be commercial rather than strategic. This implies that China’s strategic petroleum reserve may still have room to expand, possibly by another 500 million barrels. Whether Beijing continues filling these reserves will significantly influence global oil prices.
Implications for OPEC+ and Global Markets
With OPEC+ choosing to hold production steady in early 2026 despite the risk of oversupply, China’s actions have become central to market balance. Other oil producers and traders are increasingly calibrating their strategies based on signals from Beijing rather than Vienna or Riyadh.
This shift suggests a gradual redistribution of market power—from coordinated producer restraint to large-scale, opaque demand management by major importers.
What to Note for Prelims?
- China is the world’s largest crude oil importer.
- OPEC+ includes OPEC members and allies such as Russia.
- Brent crude is a key global oil price benchmark.
- Strategic petroleum reserves are used to cushion supply shocks.
What to Note for Mains?
- How demand-side interventions can influence global commodity prices.
- Limits of producer cartels in an era of large importing economies.
- Strategic stockpiling as a tool of economic and geopolitical power.
- Implications for global energy governance and price stability.
