China's Oil Game: A Surprising Twist
China's recent oil moves have turned the tables on conventional wisdom. With November's imports up 5% year-on-year, the country is not only buying more crude but also expanding its storage capacity. This challenges the narrative of weakening oil demand growth, leaving forecasters scratching their heads.
FGE NexantECA, a leading forecaster, recently revised China's apparent demand for October downwards to 14.6 million barrels of crude daily, a significant drop from earlier expectations. However, the same forecaster predicts that China, the world's top oil importer, will boost its oil purchases next year. The reason? China is building a massive crude oil reserve.
As a result, Asian oil demand, expected to dip this year, is forecast to rebound in 2026, adding 36,000 barrels daily. This makes Asia one of the few regions where oil demand is projected to grow, while the rest of the world is expected to see a decline.
But here's where it gets controversial... Bloomberg reports that China's stockpiling is "masking" a slowdown in oil demand growth due to the adoption of electric vehicles. Yet, car sales figures from China show an annual decline of 32% for total car sales and a 17% drop in EV sales specifically. So, are EVs really the game-changer we thought they were?
According to Kpler's data, China's oil storage currently exceeds 1.5 billion barrels. Energy Aspects estimates storage capacity at 2 billion barrels, with the potential to expand by 260 million barrels in 2026. An analyst from Energy Aspects even suggests that actual imports could exceed forecasts, especially in the second half of the year.
China has been stockpiling crude oil at a rate of around 1 million barrels daily this year. Next year, it is expected to continue at a rate of 900,000 barrels daily, according to Citigroup. This is an increase from the 800,000 bpd rate since March, and when we consider the first two months of the year, the rate rises to 990,000 barrels daily.
Other forecasters, like FGE, also predict an accelerated rate of oil storage next year, with an increase from 480,000 bpd this year to 600,000 bpd. The discrepancy in figures highlights the challenge of forecasting without official data on China's oil storage.
This stockpiling has been a major factor in the relative stability of oil prices this year. The assumption has been that if China, the world's largest oil importer, has a supply cushion, a surge in demand following any disruption is unlikely. This, coupled with the rise of electric vehicles, has kept a lid on prices.
With China increasing its oil storage rate, price stability is likely to continue into 2026. According to OilX, China's storage caverns are only half full, leaving room for a significant boost in reserves.
And this is the part most people miss... While many forecasters remain convinced that global oil demand growth is struggling, the International Energy Agency (IEA) has just released a report revising its demand projections higher and its glut projections lower. Total global oil supply dipped by 610,000 bpd in November compared to October, and by a massive 1.5 million bpd from September's peak. The IEA now sees a supply overhang of 3.84 million barrels daily, down from a previous forecast of 4.09 million barrels daily. This suggests that demand for oil is stronger than initially thought.
So, is the oil market ready for some surprises from China and the IEA in 2026? What do you think? Feel free to share your thoughts and predictions in the comments below!
