China is filling up its oil reserves fast

During the first nine months of the year, the world’s second-largest economy imported on average more than 11 million barrels of oil a day, an amount above the daily production of Saudi Arabia, according to official customs data. Analysts estimate 1 million to 1.2 million of those barrels were stashed in reserves each day.

Low oil prices and concern over Ukraine’s repeated attacks on Russia’s production facilities help explain the timing of the buying spree, which accelerated in March. China is the world’s biggest importer of crude and the largest buyer of Russian oil.

Energy security has long been a priority for China’s leaders. The country’s dependence on foreign nations for its crude oil—China imports about 70% of the oil it consumes—is a headache.

“The energy rice bowl must be held in our own hands," Chinese leader Xi Jinping has said repeatedly over the years.

China’s robust appetite for oil has had another unintended consequence: It has helped put a floor on prices, which approached a nearly five-year low in October. Brent crude, the international benchmark, is trading near $65 a barrel and is down 13% this year. It bounced higher following the sanctions the U.S. placed on Rosneft and Lukoil, Russia’s two largest oil companies.

“If China really stops buying, the path toward low $50 would be very quick," said Michael Haigh, global head of fixed-income, currencies and commodities research at Société Générale.

The U.S., in contrast, has been slow to replenish its emergency oil reserves, which are languishing at some of their lowest levels in 40 years. President Trump promised to fill the U.S. reserves to the top when he returned to office but has announced just one small purchase of crude thus far.

To wean itself off imported oil, China has poured hundreds of billions of dollars into reviving domestic crude production and building the world’s largest electric-vehicle industry. It has also snapped up cheap barrels—sometimes from sanctioned producers—to bolster its reserves.

China began the construction of its strategic petroleum reserves in 2004. After about two decades of development, the country has built large-scale petroleum reserve bases, both under and above ground, in a long list of locations including the eastern city of Zhoushan and the northeastern port city of Dalian.

China doesn’t make public the size of its stockpile. Analysts attempt rough estimates by subtracting the amount of processed oil from China’s imports and domestic production. Most of those projections put the stockpile at 1.2 billion to 1.3 billion barrels.

“China’s current strategic petroleum reserve and commercial stocks already provide a meaningful buffer against short-term supply disruptions," said Kelly Xu, a commodity and energy strategist at Alpine Macro.

Xu expects China’s precautionary stockpiling to continue into 2026. She estimates that Beijing has 400 million barrels in its petroleum reserve and about 800 million barrels in commercial stocks stored by Chinese oil companies.

China appears to have plenty of room to store more crude. Its total storage capacity rose to just over 2 billion barrels at the end of 2024 from 1.4 billion barrels in 2015, according to Lin Ye, an analyst at Rystad Energy. That means China has only used about 60% of its storage capacity. Ye estimates 124 million barrels of capacity will be added by the end of this year.

Few analysts actually expect Chinese refineries to slow their purchases of Russian oil because of the sanctions on Rosneft and Lukoil, which block them from conducting dollar transactions. Russia settles only 5% of its oil exports in dollars, according to Russia’s Ministry of Energy. The dominating currency—representing 67% of Russian oil exports—is the Chinese yuan.

Most of the seaborne oil imports from Russia go to China’s independent refineries, known as teapots. Many of those refineries have limited dollar assets, conduct business mostly through Chinese regional banks, and cater mostly to Chinese customers, shielding them from the impact of sanctions. Some have become hooked on cheap Iranian crude of late.

Meanwhile, the recent trade agreement between the U.S. and China did little to resolve questions over China’s purchases of Russian oil, according to analysts. China hasn’t indicated whether it would stop buying, and there had been some hope that China would agree to purchase U.S. oil and gas as part of a broader U.S.-China deal.

For now, China’s stockpiling is helping to keep global oil prices from getting even lower as traders and analysts have acknowledged a worldwide glut. The International Energy Agency forecast in October that the world would be oversupplied by an average 3.7 million barrels of oil a day in the current quarter. JPMorgan analysts put that number at 3.6 million barrels.

The Organization of the Petroleum Exporting Countries and its allies are partly responsible for the glut by continuing to pump extra oil into the market. The cartel intends to boost production by 137,000 barrels a day in November, in a reversal of cuts implemented in 2023. Energy prices that year were falling from highs hit after Russia launched its full-scale invasion of Ukraine the year before. At Sunday’s meeting, the cartel is expected to announce another increase for December.

Write to Rebecca Feng at rebecca.feng@wsj.com