What China’s oil stockpiling means for OPEC+, prices and global trade, with Lin Ye

*This transcript was generated using AI and may contain inaccuracies. [00:00] **Noah (host):** This is *Let’s Talk Energy*, your go-to podcast for smart energy insights. I’m your host, Noah Brener, and each week we’re bringing you an inside look at the dynamics shaping global energy markets through in-depth conversations with Rystad Energy experts as well as special guests. In today’s episode, we unpack the curious case of China stockpiling crude oil. This year, China has been consistently buying more crude than it needs to supply its downstream sector and putting the additional barrels into storage—sometimes as much as a million barrels per day. This unexpected source of global demand has helped keep crude prices buoyant despite OPEC+ decisions to add oil to the market by more rapidly unwinding voluntary cuts and despite growth from non-OPEC supply sources such as Brazil and Guyana. So: just how much oil is China putting into storage, and what has been the impact on prices and global balances? Why are Chinese refiners stocking up, and what might that tell us about how long they’ll keep adding to already substantial inventories? I’m joined from Singapore by **Lynn**, an expert on China’s oil market and a vice president in our analysis division, to shed some light on one of the most important drivers in the oil market today. Lynn, welcome to the program. **Lynn (guest):** Thanks for having me. **Noah:** Let’s talk energy. Can you set the scene—how much oil is China putting into storage to date? When did this begin, and when did we notice it? **Lynn:** From March to June, China put about 140 million barrels of crude oil into storage, which is a huge number. I didn’t fully realize the scale until everyone was talking about it during APAC week in Singapore earlier this month. **Noah:** It’s definitely come to the forefront of oil-market discussions. Is the stockpiling continuing today—are they still buying additional volumes? **Lynn:** The stockpiling slowed from July into August, and we think September will probably see a stock draw, according to our estimates. In the later months of this year, we think China will continue to build stocks—and also into next year. --- [00:04] **Noah:** We’ll come back to our estimates and how we see this playing out, but first the broader context: how has this impacted global supply-demand balances and therefore prices? **Lynn:** China is the world’s biggest oil importer, so anything happening there attracts attention. This year is a bit special with OPEC+ moving to regain market share. From May onward, OPEC+ embarked on a path to bring more barrels back to market, and China absorbed a lot of the surplus—supporting prices globally. **Noah:** So without that additional buying, we might have seen a more dramatic price response after those OPEC+ decisions. But our numbers—and those of others—show growing oversupply in coming months. Is China’s surplus buying enough to offset that? **Lynn:** According to our balances, in 2026 we expect about 2 million barrels per day of surplus—supply outpacing demand growth. China’s stockpiling can absorb some supply but is far from enough to clear all the excess. **Noah:** So stockpiling helps but isn’t a solution for the kind of oversupply we and others expect. Prices have been surprisingly buoyant, but that was during a period when surpluses weren’t as large as what we expect ahead. **Lynn:** A supply correction is needed despite the looming surplus—either OPEC+ cuts production again, sanctions bite more on Russia/Iran, or U.S. shale slows further. Some supply lever will be needed to balance the market. The recent resilience has likely given OPEC+ confidence that demand is decent this year. --- [00:08] **Noah:** You wrote an analysis recently noting that China’s crude inventory changes are a critical buffer—but not a permanent solution. How might the market and prices look if China doesn’t continue these purchases? **Lynn:** Given the size of China’s market, any stock build or draw matters globally. It surprised people because oil demand growth in China has slowed due to the energy transition, and even OPEC+ may not have expected such strong crude imports. People then realized China has built a lot of storage in recent years. The question is: how long will it last? We think stock-building continues, because capacity is still growing and many projects are coming in the next few years. **Noah:** Do we have numbers on storage capacity and how much is used? **Lynn:** There’s no precise number—China’s sector is non-transparent—but after comparing many sources, we estimate current capacity on the ground is about 2 billion barrels, rising to ~2.2 billion barrels by end-2026. Based on our balances (supply, imports, refinery runs, consumption), current fill is about 58%, meaning ample spare capacity. That need to fill new tanks is driving imports. **Noah:** So storage isn’t the limiting factor. Who is buying and storing—state companies or private players? **Lynn:** Importers in China are broadly state companies and independents, and they behave differently in crude buying, runs, and margins. This year both sectors bought strongly—driven by different reasons—but both stockpiled a lot at the same time. --- [00:12] **Noah:** Are these strategic reserves or commercial stocks? **Lynn:** China’s SPR is run by the government. There are also commercial stocks run by state companies, but these are often categorized as SPR because state companies are government-managed. Independents’ stocks are commercial. The 2025 stockpiling spanned all these sectors. **Noah:** What might China do with this crude—re-export as crude, export more products, or keep it as a strategic buffer? **Lynn:** I don’t think China will re-export the crude. Domestic demand is solid and sizable. It’s really a buffer. China doesn’t usually hedge much on the crude side; it’s saving for its own use. **Noah:** If China’s buying, someone’s selling. Have sources of imports changed? **Lynn:** Producers are happy China’s there to absorb supply. In March, China imported a lot from Russia and Iran—likely driven by fears of tougher sanctions later this year. In April–May, more additional imports came from the Middle East, which often lowers OSPs during China’s heavy refinery maintenance season. China can “play the game”: stockpile when OSPs are lower and consume when demand is higher. Different reasons and sectors drove this year’s pattern. --- [00:16] **Noah:** So motivations include geopolitics (hedging against future sanctions) and price. Anything else? **Lynn:** Multiple reasons: geopolitics (sanctions risk could intensify), fear of tariff wars (U.S. could get tougher; if ethane/propane flows are hit, crude can be an alternative feedstock route for special chemicals), pure economics (buy more when prices are cheaper), and fundamentals (refinery runs are seasonal—maintenance is planned, but stock builds/draws can flex). **Noah:** But markets are in backwardation (prompt prices higher than futures). Why buy now instead of waiting? **Lynn:** Today’s backwardation also stems from OPEC+ strategy—announcing more barrels for future months while prompt prices are supported by geopolitical risk, keeping backwardation persistent. OPEC+ reassesses monthly and can pivot back to cuts anytime. China also worried future prices might be higher due to OPEC+ changes and fast-moving sanctions or ceasefire dynamics. So, even with a lower forward strip, risks argued for buying prompt barrels. --- [00:20] **Noah:** OPEC+ surprised markets by unwinding ~2.2 mb/d of voluntary cuts more rapidly. Did China’s stockpiling factor into that? **Lynn:** We don’t know OPEC+ thinking, but they assess demand monthly. When they saw exports being absorbed easily, that likely boosted confidence to keep rolling the unwind plan—month by month—bringing us to where we are now. **Noah:** Looking ahead, I’ve read reports that China plans to continue buying well into next year—numbers like another ~140 million barrels through March. Is that realistic? **Lynn:** That news isn’t easily confirmed—it wouldn’t likely be directly reported by the government. If it can’t be confirmed, everyone knows OPEC+ will test whether it’s true by continuing to add barrels. Rather than guessing policy, consider the drivers: geopolitics, fundamentals, economics. If those conditions persist—and we think they do—stockpiling likely continues into next year. **Noah:** And in our outlook—are we assuming continued stockpiling this year and next? **Lynn:** We think stockpiling in the later months of this year will slow—it already has—mainly because independents have less import quota left. Independent refineries need quota to access imported crude; utilization of crude import quota is already above ~80%, so remaining quota may not allow much beyond operational needs. --- [00:24] **Noah:** Some listeners may not be familiar with the import quota. What is it, and could it be increased? **Lynn:** “Quota” may feel distant to Western listeners, but it still exists in China—originally a legacy of the planned economy, now a management tool to regulate the independent sector. State-owned companies aren’t constrained by import quota; they can buy freely. Independents apply for annual quota aligned to nameplate capacity; it’s allocated at the start of the year. They can pace imports through the year, but by year-end they usually have less left, limiting runs and extra buying. **Noah:** Understood—so independents are constrained as quota is ~80% used, limiting incremental buying, while state players aren’t constrained. **Lynn:** Correct. **Noah:** Stepping back: China’s oil demand remains the biggest driver of global prices. Setting aside storage buying, how do we see future demand—EVs, CNG trucking, etc.? What are you watching? **Lynn:** We see **2025 as the peak oil-demand year for China** overall. Gasoline and diesel already peaked and are on a declining trajectory. Near-term declines are offset by rising jet fuel and petrochemicals, but from next year onward, the loss in gasoline/diesel outpaces gains elsewhere, so total oil demand starts to fall. China relies on imported petrochemical feedstocks (ethane, propane) and can toggle between those imports and domestic refinery-produced feedstocks. Refinery runs have entered a plateau—flattening and unlikely to revisit the 2023 highs soon. **Noah:** So transport fuels fade, but petrochemicals and jet provide partial offsets, and there’s flexibility between feedstock imports and domestic production. **Lynn:** Exactly. --- [00:28] **Noah:** That’s a great place to wrap. Lynn, thanks so much for joining us today. **Lynn:** I hope to come back for another episode if anything interesting happens. **Noah:** I’m sure there will be plenty when it comes to China and the oil market. Looking forward to having you back soon. **Lynn:** I really enjoyed it today. **Noah:** Let’s recap. China has added millions of barrels of oil to storage this year, helping absorb additional supply and supporting benchmark prices. Purchases were made by both state refiners and private companies, motivated by hedging against future U.S. sanctions and taking advantage of lower prices. We believe this trend is likely to continue into 2026 in an opportunistic manner as refiners buy on relative dips and as storage capacity grows. However, storage buying alone won’t balance the market; supply adjustments—via sanctions impacts, declining U.S. shale, or new OPEC+ policy—may be needed. Thanks for listening to *Let’s Talk Energy*. This podcast is a production of Rystad Energy, produced by Laura Rodriguez Scout and B. Oak. Check the show notes for further analysis, and connect with us on social: we’re @RystadEnergy on major platforms. While you’re there, hit like, leave a review, and subscribe. Keep up to date on our website, and send questions or comments to **[podcast@rystadenergy.com](mailto:podcast@rystadenergy.com)**. Most importantly, don’t forget to join us next week for more *Let’s Talk Energy*.