China is expected to increasingly rely on its massive crude oil stockpiles as refiners reduce imports and maintain production cuts in response to weak domestic fuel demand and persistently poor refining margins, according to analysts and industry officials.

Tepid demand in the world’s largest crude importer is adding pressure to global oil markets, helping cap prices even amid ongoing geopolitical uncertainty linked to tensions between the United States and Iran. Oil benchmarks have fallen sharply in recent weeks despite continued concerns over disrupted Middle East supply routes.

China has responded by tightening its import strategy and drawing more heavily on domestic inventories. Authorities have encouraged domestic production, restricted fuel exports, and issued additional import quotas to secure discounted supplies, particularly from Russia and Iran.

At the same time, seaborne crude imports are expected to fall to around 6.4–7.5 million barrels per day in May—potentially the weakest level in nearly a decade—following a sharp 20% year-on-year decline in April. This reflects both weaker demand and deliberate stock management by refiners.

Industry estimates suggest refiners have been drawing on commercial inventories at a pace of roughly 1 million barrels per day in recent weeks, reducing reliance on fresh imports. Stockpiles, which peaked near 1.25 billion barrels earlier this year, are now being gradually worked down rather than aggressively replenished.

Refining economics remain under pressure, with margins weakening due to government-controlled fuel prices that limit how much refiners can pass on higher input costs. Analysts estimate losses of roughly 600 to 1,300 yuan per metric ton of crude processed, depending on feedstock quality.

Major state-owned refiners such as Sinopec and large private processors are expected to keep throughput constrained into June. Smaller independent refiners, often referred to as “teapots,” are also facing increasing pressure to cut output despite earlier policy guidance encouraging stable production.

Demand weakness is particularly visible in transport fuels. Gasoline and diesel inventories are reportedly at multi-year highs, while structural shifts such as electrification and increased public transport use are reducing long-term consumption growth in the sector.

Analysts say China’s strategy reflects a calculated balancing act: managing refining losses and inventory levels while maintaining supply security during a period of volatile global oil markets and uneven domestic demand recovery.