Overview
China’s sharp reduction in crude oil imports has helped contain the rise in global oil prices, but shrinking inventories elsewhere could still push crude to $120 a barrel or higher if the Strait of Hormuz remains closed, according to Capital Economics.
Import Decline Details
In June, Chinese crude imports fell more than 40% year‑on‑year to 7.2 million barrels per day, which is over 4 million barrels per day below the pre‑war level and roughly 30% of the volume that previously transited the Strait of Hormuz. The decline is far larger than the reductions recorded during the COVID‑19 pandemic.
Drivers of the Decline
Analysts attribute the drop primarily to a shift from stockpiling to drawing down existing inventories rather than a sudden collapse in underlying oil demand. End‑user demand in China fell by about 5% compared with a year earlier, based on U.S. Energy Information Administration estimates. While the rapid adoption of electric vehicles exerts long‑term pressure on fuel consumption, it cannot explain such a large short‑term change. Lower petrochemical activity, coal substitution and a temporary refined‑fuel export ban also had limited impact.
Inventory and Reserve Context
China accumulated an estimated surplus of 0.7‑1.1 million barrels per day of crude during 2025. Port inventories have since fallen sharply as refiners and policymakers used those reserves to limit purchases during the supply shock. By the end of 2025, China held an estimated 1.4 billion barrels of commercial and strategic crude reserves, equivalent to about 120 days of pre‑war import coverage and roughly 70% above comparable U.S. reserves. These holdings could allow China to maintain imports near current levels for several more months, potentially into 2027, though running inventories lower would leave the country less protected against another supply disruption.
Outlook for Chinese Buying and Global Prices
Chinese buying is unlikely to recover to pre‑war levels before oil prices retreat toward $60 a barrel and stockpiling becomes attractive again. Meanwhile, OECD commercial inventories have continued to fall since the Iran conflict began, indicating tighter supply conditions if the Hormuz route stays blocked for an extended period. Capital Economics warns that such a scenario could drive crude prices to $120 per barrel or higher despite China’s reduced purchases.