China's surplus crude oil surges in June, giving refiners options
China accelerated the pace at which it is building crude oil stockpiles in June as the strongest imports in almost two years outweighed a rise in refinery processing.
China's surplus crude amounted to 1.42 MMbpd in June, up from 1.40 MMbpd in May and the fourth straight month above the 1 MMbpd level, according to calculations based on official data.
For the first half of 2025 China's surplus crude amounted to 1.06 MMbpd, as strong second quarter oil imports overcame a soft start to the year.
The volume of crude flowing into inventories gives Chinese refiners options in coming months, as they can choose to trim imports if they deem that oil prices have risen too quickly as a result of the Israel-Iran conflict last month.
China does not disclose the volumes of crude flowing into or out of strategic and commercial stockpiles, but an estimate can be made by deducting the amount of oil processed from the total of crude available from imports and domestic output.
Refiners processed 15.15 MMbpd in June, according to calculations based on official data released on Tuesday, up 8.8% from May and the highest rate since September 2023.
The world's largest importer of crude oil saw arrivals of 12.14 MMbpd in June, the highest daily rate since August 2023, and up 7.1% from May.
Domestic oil production was 4.43 MMbpd in June, up from 4.35 MMbpd in May.
Putting June imports and domestic output together gives a total of 16.57 MMbpd of crude available to refiners, leaving a surplus of 1.42 MMbpd once refinery throughput of 15.15 MMbpd is subtracted.
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It is worth noting that not all of this surplus crude is likely to have been added to storage, with some being processed in plants not captured by the official data.
But even allowing for gaps in the official data, it is clear that from March onwards China has been importing crude at a far higher rate than it needs to meet its domestic fuel requirements.
Price moves. China has built up a track record of importing more crude than it needs when it believes prices are low, but pulling back when prices rise.
The surge in imports in the second quarter came against a backdrop of declining crude prices when the cargoes would have been arranged.
Global benchmark Brent futures dropped from a high of $75.47 a barrel on April 2 to a four-year low of $58.50 on May 5, a period during which cargoes that arrived in the second quarter would have been secured.
Conversely, China's soft crude imports in the first quarter came after prices were rising during the window when those cargoes would have been bought.
Brent went from a low of $70.85 a barrel on December 6 to a six-month high of $82.63 on January 15, meaning China's refiners were facing rising import costs for cargoes arriving in the first quarter.
Brent prices have been volatile in recent weeks amid the brief conflict between Israel and Iran in June, which was later joined by the United States.
Brent reached a six-month high of $81.40 a barrel on June 23 and has since moderated to end at $68.71 on Tuesday, as concern mounts over the global economic impact of the higher import tariffs promised by U.S. President Donald Trump.
This volatility may result in China's refiners easing back on import volumes in August and September, but much still depends on whether the June spike remains a brief blip higher amid an overall declining price trend.
The views expressed here are those of Clyde Russell, a columnist for Reuters.
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