#What is China doing with its strategic petroleum reserve?
China has started to reduce its strategic petroleum reserves, following the guidance of US Energy Secretary Chris Wright. This decision arises amid ongoing disruptions in global energy supplies caused by military actions involving the US and Israel against Iran, adding to the existing instability in the Middle East.
As of December 2025, China's strategic oil inventories were substantial, amounting to approximately 1.4 billion barrels. The government itself retains around 360 million barrels, while the country was previously augmenting its reserves by about 1.1 million barrels per day throughout 2025.
In April 2026, the government authorized major state-owned refiners such as Sinopec and CNPC to utilize their commercial reserves in light of the Iran conflict. Wright's announcement in mid-May indicated that this drawdown was not limited to commercial stocks but also included China's strategic reserves, highlighting the significance of the situation.
#Why does this matter for China and the global energy market?
The main reason for this drawdown is clear. The military actions against Iran have interrupted oil flow from the Middle East, which is critically important to China, the world's largest importer of crude oil. A considerable amount of China's oil imports transit through the Strait of Hormuz, making any conflict in the area a direct threat to its energy security.
In this context, Wright suggested that China may seek to increase its purchases of US crude oil as a potential workaround for the disruptions in Middle Eastern supplies.
#What implications does this have for energy investors?
The release of strategic petroleum reserves by China, similar to the coordinated SPR release by the US and its allies in 2022, initially led to a decline in oil prices. However, that effect diminished after a few months. Investors should remain vigilant about whether China's current strategy will yield similar results, which largely depends on the evolving situation in Iran and the surrounding region.