China’s Oil Puzzle: Imports climb while demand stalls

China's crude oil imports showed modest growth in the early months of 2025. In April, arrivals stood at 11.69 million barrels per day (bpd), slightly lower than March’s 12.1 million bpd, yet 7.5% higher than April 2024. Over the first four months of the year, average imports reached 11.83 million bpd, marking a 0.5% rise from the same period last year. However, this uptick appears to be driven more by opportunistic buying than by genuine increases in fuel demand. (Source: Reuters)

The recent strength in imports is largely due to discounted crude oil from Iran and Russia. China’s seaborne imports from Russia were 1.38 million bpd in April and 1.22 million bpd in March, making them the strongest two months since October 2023. Imports from Iran reached 743,000 bpd in April, a drop from March’s 1.39 million bpd, which had been the highest monthly level since October.

New U.S. sanctions imposed in March and April 2025 on two small Chinese refiners—Shandong Shouguang Luqing Petrochemical and Shandong Shengxing Chemical—created significant challenges in sourcing Iranian oil. This not only curbed imports by those specific refiners but also had a chilling effect on larger independent refiners, leading to a broader decline in Iranian crude purchases in April.

The surge in imports is not being mirrored by a rise in consumption. Instead, most of the additional crude appears to be flowing into China’s strategic and commercial storage facilities. In March, the surplus crude—calculated as the difference between imports plus domestic output and refinery throughput—reached 1.74 million bpd, the highest level since June 2023. This trend likely continued into April.

Chinese refiners are taking advantage of lower prices and the availability of sanctioned crude by building up inventories. With expectations of tightening sanctions on Iran and Russia, refiners are acting preemptively, securing discounted oil even if domestic fuel demand remains sluggish. This strategic accumulation reflects a focus on long-term supply security rather than immediate consumption needs.

Global oil prices are under pressure due to increased supply from OPEC+ and concerns over global economic growth, which are being exacerbated by ongoing trade tensions, including those tied to the return of Donald Trump’s protectionist policies. While such price dips might normally spur higher Chinese imports, refiners may tread more cautiously this time, given the uncertain economic outlook and evolving sanction regimes.

The recent rise in China's crude oil imports should not be mistaken for a recovery in domestic demand. Instead, it reflects strategic stockpiling amid fears of worsening sanctions and attractive pricing from sanctioned suppliers. Going forward, China’s buying behavior will likely depend on the evolution of geopolitical risks, economic conditions, and refiners’ ability to navigate sanctions.


(Disclaimer: This slideshow has been sourced from Reuters)