Wed, Sep 24, 2025 page7

• Why is China stockpiling so much oil?

  • By Javier Blas / Bloomberg Opinion
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  The big question troubling the energy market now is why China is stockpiling so much oil. In problem-solving, the principle of Occam’s razor recommends searching for the simplest explanation. So, perhaps the answer is as straightforward as “because it’s cheap.” Still, the conspiracy theorist in me says there is more to it. China has purchased more than 150 million barrels — costing about US$10 billion at current prices — above its actual use so far this year. For a country that buys more electric vehicles than anywhere else, that demands dissecting.

  The stockpiling was exceptionally high during the second quarter, when the International Energy Agency estimated that China absorbed over 90 percent of the global stockpiling we can measure. That has helped support prices this year, and with the oil market forecast to move into a huge surplus, whether China continues its buying spree — and for how long — is crucial for next year. Here, we should admit what we do not know. At the annual Asia-Pacific Petroleum Conference last week in Singapore, oil traders agreed only that China has the capacity to store more crude. Beyond that, “nobody has a crystal ball about the duration of Chinese buying for its strategic storage,” said Ilia Bouchouev, a former oil trader and now a senior research fellow at the Oxford Institute for Energy Studies.

  Be skeptical of anyone claiming to know what the Chinese Communist Party plans. Instead, I will offer some educated guesses about the factors at play. Importantly, Chinese policy is multidimensional, so several considerations are probably intertwined. Let us start with the simple explanations:

  1. Opportunistic buying. Chinese commodity officials have demonstrated they are canny traders (look at their copper purchases, for example) with a very long-term view and oil is cheap. In real terms, adjusted by the cumulative impact of inflation, West Texas Intermediate is changing hands at about the same price as 20 years ago.

  2. The opportunity is moot if one lacks the capacity. For China, the timing was right: Lots of storage has come online recently, and plenty more is available for next year. Even now, about half of China’s tanks and caverns are empty, according to market estimates.

  3. China has introduced new rules that have effectively added to the storage needs. An energy law enacted on Jan. 1 codifies for the first time strategic storage as a legal requirement for state-owned and private companies. Effectively, the state is sharing the responsibility of stockpiling with the commercial sector, setting the legal foundation for an increase in total oil inventories. That legal change is not often discussed, but, anecdotally, it appears to have played a major role in the purchases.

  Until here, William of Ockham, the 14th century Franciscan friar who made a mark on the scholarship of reasoning, would probably be proud. Those three explanations are straightforward. All of them are probably true, but, very likely, there is more to it, including a bit of realpolitik, if not conspiracy theory.

  4. China has understood that it needs to boost its oil security in a world where the US is wielding sanctions and tariffs willy-nilly. Today, China buys 20 percent of its oil from countries under US sanctions — chiefly Iran, Russia and Venezuela. None can guarantee that the US would not be able to, at the very least, hinder that flow in the future. Building more stocks is only prudent. The only question is what is enough: Currently, China has inventories equal to 110 days of consumption. If the grapevine in Singapore is right, that could be extended to 140 to 180 days by next year.

  5. Does China fear an interruption in supply beyond US and European sanctions? Oil traders who traffic in intrigue utter only one word: Taiwan. For a significant minority in the oil market, the supplemental buying makes sense if Beijing is preparing for military conflict. In this view, the simplest explanation for the stockpiling is that it is gearing up for conflict. For them, Occam’s razor marries easily with conspiracy.

  6. China might see oil as an alternative to US Treasuries, a way to reduce its exposure to US assets. Putting, say, US$10 billion this year in crude, and perhaps as much again next year, is a way to diversify its foreign reserves. After all, Beijing is also buying gold and investing in non-dollar assets. Put it all together, and it is difficult to avoid a conclusion: China would probably continue stockpiling oil next year for commercial and strategic reasons, mopping up part of the expected global surplus. Whether one adheres to the Occam’s razor or elaborate guesswork, Beijing has good reasons to store more oil.

  Javier Blas is a Bloomberg Opinion columnist covering energy and commodities. He is coauthor of The World for Sale: Money, Power and the Traders Who Barter the Earth’s Resources. This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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