In an unexpected twist for the global energy landscape, China’s crude oil surplus has contracted significantly — driven by a sharp uptick in refining activity. As the world’s largest crude importer grapples with shifting demand and storage dynamics, the drop in the surplus of crude oil in China marks a pivotal moment in the crude oil market and the broader China energy sector.
China’s surplus of crude oil meaning the volume of crude available for storage after processing and domestic use has fallen to just about 570,000 barrels per day (bpd) in the most recent month. That represents a marked decline from earlier in the year when surplus levels were hovering near 1 million barrels a day and reached approximately 1.01 million bpd in August.
The drop in surplus comes amid import data showing that China averaged about 11.5 million bpd of crude in September. Though that figure marks a 3.9 % year-on-year increase, it is also a 4.5 % month-on-month decline and the lowest monthly average since the start of the year.
In short, China’s ability to stockpile crude is being constrained by higher refinery runs and somewhat softer import growth. According to calculations cited in the report, the average surplus since the start of the year stands around 930,000 bpd.
At the heart of this change is a surge in refining activity within China’s downstream sector. Domestic refineries have stepped up processing, reducing the quantity of crude left over for storage and hence shrinking the surplus. The rise in throughput means more of the imported (and produced) crude is being turned into fuels, chemicals or other refined products rather than being stacked away.
In addition, China has been expanding its storage infrastructure plans are reportedly underway for 11 new storage facilities with a combined capacity of 169 million barrels over the next two years. This signals an intention to continue robust stock-building, even as the surplus currently appears diminished.
Meanwhile, China remains heavily reliant on Russian oil, which accounted for over 2.1 million bpd of supply in 2024. Saudi Arabia is trailing with about 1.576 million bpd, per Visual Capitalist data. These supply sources give Chinese refiners considerable flexibility in processing discounted crude, fuelling that refining surge.
The contraction of China’s crude oil surplus holds meaningful implications for the crude oil market. For years, China’s accumulation of crude stocks has helped absorb excess barrels globally, effectively acting as a sponge in what would otherwise have been a larger oversupply. But now, with fewer barrels flowing into storage, that “sponge” effect diminishes.
From a supply-demand perspective, the refining surge in China helps drive demand for feed-crude and supports refining margins, but it also implies that less crude remains sitting idle. For global traders and producers, this may tighten availability of surplus crude for export or storage elsewhere though the risk remains that global demand does not keep up, causing a supply overhang. In fact, other analyses indicate that the market may be shifting toward oversupply.
Meanwhile, the China energy sector is undergoing a complex transformation. On one hand, higher refining throughput suggests robust industrial activity; on the other, structural headwinds such as the growth of electric vehicles, weaker diesel consumption and slower overall growth in refined-fuel demand complicate the outlook. This means that while the refining surge is active today, longer-term demand growth is less assured.
Looking ahead, the trajectory of China’s crude oil surplus and refining surge depends on multiple factors. If China continues to ramp up refining and use more crude internally rather than for storage, the surplus may remain constrained. At the same time, the planned storage capacity expansion suggests Beijing is hedging for a scenario of future surplus or strategic stockpiling.
Experts note that global oil markets may be entering a period of oversupply despite China’s stock-building efforts. According to commentary, even China’s aggressive purchases may not be sufficient to prevent a glut in coming quarters. For the China energy sector specifically, a key question will be whether refining growth can continue to expand in the face of structural demand shifts and if fuel consumption ultimately rebounds.
From a policy standpoint, China’s refining capacity and policy toward crude imports will matter. Any change in import sourcing (such as sanctions or trade shifts) or a slower than expected growth in fuel demand could influence surplus levels and global supply balances.
In sum, China’s crude oil surplus is falling as refining activity accelerates, marking a subtle yet significant shift in the crude oil market and China’s energy dynamics. While the refining surge reflects strong internal processing and demand for refined products, the shrinking surplus means that China is storing less crude potentially reducing its role in soaking up global excess supply. For the crude oil market, this underscores a developing tension between higher processing, strategic stockpiling and structural demand challenges. For the China energy sector, the path ahead is littered with variables refining growth, storage expansion and evolving fuel consumption trends will all shape how this story unfolds.
Attribution: This analysis is based on reporting by Irina Slav of OilPrice.com (“China’s Crude Oil Surplus Drops Amid Refining Surge”).