China’s massive oil reserves give Beijing leverage during Iran war

China's extensive oil reserves have enabled Beijing to reduce crude imports during the Iran war, according to The Wall Street Journal. The country's crude reserves are estimated to be between 1 billion and 1.4 billion barrels, which is enough to cover roughly 120 days of imports. This substantial stockpile has allowed China to cut imports by 23% between March and July compared to the previous year, helping to stabilize global oil prices and minimize the risk of supply disruptions.

China's stockpiling efforts intensified in 2024, with an estimated addition of 1 million to 1.2 million barrels per day. Imports from Russia and Iran increased as discounted, sanctioned crude became available, with Russian crude imports rising by 26% and Iranian imports more than doubling between 2022 and 2025.

By early May, China began drawing down commercial inventories, averaging around 700,000 barrels per day through mid-August. Despite substantial strategic reserve reserves remaining intact, China has restricted refined-product exports, with gasoline exports plunging 93% year-on-year during the second quarter, diesel shipments decreasing about 25%, and jet fuel exports halved. As a result, refinery runs fell to approximately 12.5 million barrels per day in June and July from over 15 million before the war.

China has been reducing its dependence on imported oil through renewable energy, electric vehicles, high-speed rail, and coal-based chemicals. Renewables generated around two-fifths of China's electricity during the first half of the year. However, this strategy has economic costs, as China relied on imports for about 70% of its crude before the war.

Weaker refining activity is impacting industrial output, with China's oil and petrochemical sector contributing 90% of the second-quarter slowdown in Chinese industrial production.