China’s sharp drop in crude imports is freeing up supplies for the rest of Asia, helping refiners secure more cargoes and preventing a deeper regional shortage at a time when supplies from the Persian Gulf remain constrained.
“China took its foot off the gas on buying oil,” Michelle Brouhard, head of policy and geopolitical risk at Kpler, said. “When they stop importing, it allows the rest of the market to breathe.”
Asia has been bearing the brunt of Gulf disruptions since the start of the Iran war, as major importers—including China, India, Japan and South Korea—heavily rely on oil passing through the Strait of Hormuz. Last year, the region sourced roughly 60% of its imported oil from the Middle East.
Chinese crude imports in May are now tracking around 6.6 million barrels a day, the lowest level since 2016, Kpler data showed. Weaker refining activity and lower exports of refined products are weighing on domestic operations, sharply reducing Beijing’s crude purchases from Russia, Africa and parts of the Americas, according to the data provider.
“Prices just got high enough that [Chinese importers] thought ‘we’ll just draw down our inventories’,” Brouhard said.
The shift is most visible in imports of U.S. crude. Asian countries excluding China are on pace to import a record 1.94 million barrels a day in May, according to Kpler. Imports of African crude are also approaching record highs at roughly 1.7 million barrels a day.
The extra supply has helped refinery activity across Asia hold up better than expected. Refinery runs—how much crude refineries are processing into products like gasoline or jet fuel over a given period—are projected to rise by around 900,000 barrels a day from April to roughly 14.8 million barrels a day this month, the data provider said.
Still, regional refining activity remains 1.3 million barrels a day below year-earlier levels and well below normal seasonal rates. Kpler expects runs to remain constrained into the third quarter as disruptions in the Strait of Hormuz continue to pressure fuel production.