New York. China has emerged as a decisive force in global oil pricing, challenging long-held assumptions that producer alliances such as OPEC+ hold the primary lever over crude markets, according to a Reuters analysis by columnist Clyde Russell.
Conventional market thinking has long maintained that oil prices are largely shaped by production decisions taken by major exporters, particularly OPEC+, the grouping of the Organisation of the Petroleum Exporting Countries and allies led by Russia.
While that logic held for much of the past decade, Russell argues that developments in 2025 exposed its limitations.
“That shibboleth was challenged in 2025 by China, which used its status as the world’s biggest oil importer to provide an effective price floor and ceiling by either increasing or decreasing the volume of crude it sent to storage tanks,” Russell writes.
OPEC+ production cuts introduced in 2022 initially succeeded in propping up prices.
However, the impact weakened once the alliance began reversing those cuts in April 2025.
Facing the prospect of an oil glut, OPEC+ has opted to keep output steady in the first quarter of 2026, effectively shifting the burden of balancing the market elsewhere.
“That leaves China to mop up the excess,” Russell notes.
China’s behaviour in 2026 has therefore become the central uncertainty for crude markets.
Other participants, Russell observes, are increasingly likely to calibrate their strategies based on Beijing’s actions.
A key challenge for analysts is China’s opacity. The country does not publish official data on either its strategic petroleum reserve or its commercial crude stockpiles.
This lack of transparency complicates efforts to track physical oil flows and anticipate policy direction.
Nonetheless, estimates can be derived by comparing total crude supply, imports plus domestic production, with refinery throughput.
What became evident in 2025, Russell writes, is that “China was buying more crude than it needed for domestic consumption and exports of refined products.”
For the first 11 months of 2025, China recorded a surplus of about 980,000 barrels per day (bpd).
During that period, combined imports and domestic output averaged 15.80 million bpd, while refinery processing stood at 14.82 million bpd.
The surplus began accumulating in March, following an unusual drawdown earlier in the year when refinery runs briefly exceeded available crude.
Russell highlights a strong correlation between China’s inventory behaviour and oil prices.
“There is a solid correlation between the volume of surplus crude and the price of oil, with China adding barrels when prices dip but cutting back when they rise,” he writes.
This pattern was evident during mid-2025. Surplus crude peaked at 1.10 million bpd in August before dropping to 570,000 bpd in September.
The decline reflected purchasing decisions made earlier in the year, when prices were elevated following the Israel–Iran conflict in June.
Brent futures surged to a six-month high of $81.40 a barrel on June 23.
As prices softened in subsequent months, China’s refiners resumed aggressive buying.
By November, surplus crude had risen to 1.88 million bpd—the highest level since April and sharply up from 690,000 bpd in October.
Russell argues that China’s storage strategy was a key factor behind the relative price stability seen in the second half of 2025, with Brent trading in a narrow band around $65 a barrel.
“It could be argued that China’s storage flows are the main reason that crude prices were locked in a fairly narrow range in the second half of 2025,” he writes.
Looking ahead, the critical question is whether China can continue absorbing excess supply in 2026, effectively anchoring prices.
Estimates of China’s current crude inventories vary widely, ranging from about 1 billion barrels to as much as 1.4 billion barrels.
Using a benchmark of 90 days of import cover, roughly 11 million bpd, 1 billion barrels would be sufficient.
However, Russell notes that around 700 million barrels are likely commercial stocks, implying a strategic reserve closer to 500 million barrels.
“That in turn suggests that Beijing may wish to add about another 500 million barrels to the strategic stockpile, though the timeline is uncertain,” he writes.
China is expanding its storage capacity. State oil firms, including Sinopec and CNOOC, are adding at least 169 million barrels of capacity across 11 sites during 2025 and 2026.
Assuming storage inflows of 500,000 to 600,000 bpd, this would equate to roughly 200 million barrels over a year.
If Beijing maintains this pace, Russell suggests, much of the projected global supply surplus in 2026 could simply end up in Chinese tanks.
Such a scenario would likely reintroduce a Chinese-supported price floor—while also enforcing a ceiling, as China would curb imports if prices rose too sharply.
“Of course, there are a number of ‘ifs’ in the above paragraphs,” Russell cautions, “but the recent history suggests that China will continue to build inventories in 2026, and probably into 2027 as well.”
What is already clear, he adds, is that China is willing to use inventory flows as a pricing tool.
With seaborne crude imports of around 10 million bpd—about a quarter of the global total—“it is possible that Beijing’s policies are now the most important factor in oil markets.”
