Capital Economics has warned that while China’s dramatic reduction in crude purchases has so far restrained the rise in global oil prices, a prolonged closure of the Strait of Hormuz combined with falling inventories elsewhere could still lift crude to $120 a barrel or more.
Chinese crude imports plunged by more than 40% year on year in June to 7.2 million barrels per day. That level sits over 4 million barrels per day below pre-war imports - roughly equivalent to 30% of the crude that transited the Strait of Hormuz before the Iran conflict.
Analysts point out that the drop is far steeper than the declines recorded during the pandemic and is driven principally by a switch from stockpiling to drawing down existing inventories rather than a sudden collapse in underlying oil demand.
During 2025, China is estimated to have accumulated a surplus of crude amounting to about 700,000 to 1.1 million barrels per day. As the supply shock unfolded, port inventories fell sharply as refiners and policymakers tapped those holdings, allowing Beijing to materially limit new purchases.
Lower end-user demand contributed to the change, but to a lesser extent. Estimates from the US Energy Information Administration indicate that China’s oil consumption in June was about 5% below year-ago levels. Observers say that while the rapid adoption of electric vehicles is a structural headwind for fuel consumption over time, it cannot account for the magnitude of the import decline seen in just a few months.
Other factors such as reduced petrochemical activity, substitution toward coal and a temporary ban on refined-fuel exports also exerted only limited downward pressure on imports.
At the end of 2025, China reportedly held about 1.4 billion barrels of commercial and strategic crude reserves. That quantity represented roughly 120 days of pre-war import coverage and was around 70% higher than comparable United States reserves. Those stockpiles provide Beijing with scope to keep imports at current, lower levels for several more months and possibly into 2027.
However, drawing inventories down to sustain reduced imports leaves the country with less margin for error. Running these holdings lower would reduce China’s buffer against any further supply disruptions.
Market participants also note that Chinese buying is unlikely to rebound to pre-war levels until oil prices fall toward $60 a barrel and restocking once again looks economically attractive. That dynamic means China may not restore previous import volumes in the near term.
Even so, subdued Chinese purchases will not necessarily protect the broader market indefinitely. OECD commercial inventories have continued to decline since the onset of the Iran conflict, a trend that would point to tightening global supply conditions if the Strait of Hormuz remains blocked for an extended period.
In short, China’s inventory management has eased immediate price pressures, but the balance of inventories outside China and the status of key shipping routes remain decisive factors for near-term price trajectories.