China recently decreased its crude oil imports, recording the lowest levels in eight years. The country imported only 33.08 million metric tons in May 2026, which translates to about 7.8 million barrels per day. This marks a significant drop of 29% from May 2025, primarily driven by the ongoing conflict in Iran and the closure of the Strait of Hormuz since early March. Analysts were surprised that this reduced demand from China prevented global oil prices from escalating to triple digits during this major supply disruption.
How did China manage to stabilize oil prices despite a significant cut in imports? Prior to the conflict, China was importing between 11 and 11.7 million barrels per day. However, by the end of May, imports had dipped below the 9 million barrels per day mark. The closure of the Strait of Hormuz, which is responsible for approximately 20% of global oil supply, played a critical role in this significant drop. J.P. Morgan analysts acknowledged China's role as a "pressure valve," as its reduced demand helped to mitigate price spikes. It is noteworthy that Brent crude prices have remained below $90 to $100 per barrel—a remarkable feat given the circumstances.
Why did China cut its imports? The country has been building its strategic petroleum reserves for years, accumulating stockpiles estimated between 900 million and 1.4 billion barrels. This strategic buildup positions China to absorb shocks, at least temporarily.
What impact has this had on smaller refiners in China? Independent refineries, known as "teapot" refiners, have faced significant challenges. These smaller operations relied on cheap crude oil from Iran and Russia. With Iranian oil unavailable due to the ongoing conflict, these refiners are losing access to their main source of affordable feedstock. In contrast, state-owned refiners, which have more diversified supply chains and access to strategic reserves, have been able to weather the storm better.
What do these developments imply for investors? China cannot rely on its strategic reserves forever. The country, which consumes over 15 million barrels per day, will quickly deplete its reserves. If Beijing must rebuild these stockpiles while access to the Strait of Hormuz remains limited, it will eventually need to increase its import levels. Analysts suggest that any increase in demand could trigger higher prices in the latter half of 2026.
For investors, it is vital to keep an eye on China's monthly oil import figures and any news regarding potential drawdowns from its strategic reserves. A rise toward 10 or 11 million barrels per day while the Strait of Hormuz remains a contested area would create a challenging scenario for the market.
Other Asian nations, including Japan, South Korea, and India, are also grappling with similar supply challenges, emphasizing the broader impact of this crisis across the region.