China overtakes OPEC+ as the primary oil worth maker
That shibboleth was challenged in 2025 by China, which used its standing because the world’s greatest oil importer to offer an efficient worth flooring and ceiling by both growing or reducing the quantity of crude it despatched to storage tanks.
Manufacturing cuts in 2022 by OPEC+, which teams the Group of the Petroleum Exporting International locations and allies led by Russia, did shore up costs. These positive aspects pale as soon as it started reversing the cuts in April this yr. Now, going through a looming oil glut, OPEC+ has determined to sit down tight and maintain manufacturing ranges regular within the first quarter of subsequent yr.
That leaves China to mop up the surplus.
What China does in 2026 is now the largest recognized unknown in crude markets. Different members are more likely to set their methods in response to Beijing.
China would not launch public data on its strategic or business stockpiles, making it difficult not solely to evaluate bodily flows, but additionally to find out what insurance policies are more likely to be adopted.
What was clear in 2025 is that China was shopping for extra crude than it wanted for home consumption and exports of refined merchandise.China doesn’t disclose the volumes of crude flowing into or out of its strategic and business stockpiles, however an estimate could be made by subtracting refinery throughput from the whole crude obtainable from imports and home output.
It’s value noting that not the entire surplus crude was more likely to have been added to storage, with some being processed in crops not captured by the official information.
For the primary 11 months of 2025, the excess crude amounted to about 980,000 barrels per day (bpd), provided that imports and home output mixed have been 15.80 million bpd, whereas refinery processing amounted to 14.82 million bpd.
The excess has been constructed up since March and got here after refiners made a uncommon draw on inventories in January and February, when processing charges exceeded obtainable crude by about 30,000 bpd.
There’s a strong correlation between the quantity of surplus crude and the worth of oil, with China including barrels when costs dip however slicing again after they rise.
This was in proof in September, when the excess crude dropped to 570,000 bpd after hitting 1.10 million bpd in August.
Cargoes arriving in September would largely have been organized on the time of the Israel-Iran battle in June, when crude costs have been elevated. World benchmark Brent futures spiked to a six-month excessive of $81.40 a barrel on June 23.
With costs easing since June, China’s refiners resumed shopping for extra crude, with a surplus of 1.88 million bpd seen in November, the largest since April and up from 690,000 bpd in October.
CAN CHINA ABSORB THE OIL GLUT?
It might be argued that China’s storage flows are the primary purpose that crude costs have been locked in a reasonably slender vary within the second half of 2025, with Brent anchored both facet of $65 a barrel.
The important thing query for 2026 is whether or not China will, and might, proceed to purchase extra crude when costs drop, successfully offering a flooring.
Estimates differ as to how a lot crude China already has saved, with a variety from round 1 billion barrels to as a lot as 1.4 billion barrels.
If the belief is {that a} nation ought to have 90 days of import cowl, and China’s base imports are round 11 million bpd, then 1 billion barrels can be enough.
However at the very least 700 million barrels are possible business inventories, implying a strategic reserve nearer to 500 million barrels.
That in flip means that Beijing could want to add about one other 500 million barrels to the strategic stockpile, although the timeline is unsure.
China is constructing extra storage, with state oil corporations together with Sinopec and CNOOC including at the very least 169 million barrels throughout 11 websites in 2025 and 2026.
Assuming a storage move of someplace round 500,000 to 600,000 bpd, this might add within the area of 200 million barrels over the course of a yr.
If Beijing does proceed so as to add to strategic inventories at this price, it might suggest that a lot of the forecast surplus of provide in 2026 will merely go into Chinese language tanks.
If this does occur, then it’s possible that crude costs will as soon as once more get pleasure from a Chinese language-supported flooring, but additionally a cap as China will merely trim imports if costs rise too excessive.
In fact, there are a variety of “ifs” within the above paragraphs, however the current historical past means that China will proceed to construct inventories in 2026, and possibly into 2027 as properly.
What can also be clear is that China is kind of ready to make use of stock flows as a pricing mechanism.
Given China’s seaborne crude imports of round 10 million bpd are a few quarter of the worldwide seaborne complete, it’s potential that Beijing’s insurance policies at the moment are a very powerful consider oil markets.
The views expressed listed here are these of Clyde Russell, a columnist for Reuters.
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(The views expressed listed here are these of the writer, a columnist for Reuters.)
