China's crude buying pause may end, tightening global oil market

Renewed U.S.-Iran fighting threatens Gulf oil exports

A prolonged slump in China’s crude buying might be nearing an end, removing a key cushion for the global oil market just as renewed U.S.-Iran tensions put Gulf supplies at risk once again, according to a Wall Street Journal report.

Chinese refiners largely stepped back from the market during the Iran war, leaving more barrels available for Europe and other Asian buyers at a time when traders were grappling with one of the worst supply shocks in modern history. The world’s top crude importer was able to cut purchases because it had built up large inventories before the conflict. The U.S. Energy Information Administration estimates China added an average of 1.1 million barrels a day to strategic reserves in 2025, pushing stockpiles to nearly 1.4 billion barrels by the end of the year.

Crude imports plunged more than 40% in June from a year earlier, according to official data. The International Energy Agency estimates China drew down about 41 million barrels from crude stocks last month, allowing refiners to meet domestic demand without aggressively competing for cargoes.

China does not have to rush back to the market. It still holds substantial oil inventories and can reduce some oil use by relying on other energy sources. Total oil stocks are estimated at around 1.9 billion barrels, enough to cover roughly 117 days of demand, according to Goldman Sachs.

But Chinese crude imports are still likely to rise, analysts at the bank said. Lower Middle Eastern prices for July and August cargoes could encourage refiners to return after Saudi Arabia and other Gulf producers cut official prices to attract buyers. China will also want to rebuild stocks. Sustained draws of around 2 million barrels a day would run against Beijing’s long-term goal of maintaining strategic and commercial reserves, Goldman analysts said.

Meanwhile, Beijing approved a large increase in July fuel exports, partially unwinding restrictions imposed in March by allowing private refiners to resume shipments, according to commodities data and analytics firm Kpler.

This could boost a recovery in Chinese crude buying at a time when renewed fighting between the U.S. and Iran threatens to derail the rebound in Gulf exports, reversing much of the recovery in flows through the Strait of Hormuz that followed Washington and Tehran’s interim deal in mid-June. Gulf exports recovered to more than 80% of preconflict levels in the two weeks after the interim deal, but fresh attacks in the Strait of Hormuz this month pushed flows back below 50% of normal levels, Goldman said. Even if tensions ease, restoring exports might take longer this time as shipping companies remain reluctant to return to key routes through the strait after recent strikes.

The prospect of a recovery in Chinese demand, combined with constrained Gulf supplies, could significantly tighten the oil market in the near term. “As the market unwinds its short positions in the face of renewed hostilities and lower shipping confidence, the lens shifts immediately to the world’s demand valve, China, for clues on where prices head next,” said Naveen Das, senior crude oil analyst at Kpler.

Goldman expects Brent crude, the global oil benchmark, to average $80 a barrel in the fourth quarter and $75 a barrel in 2027, but warns prices could climb above $110 a barrel this year if Gulf export flows fail to rebound.