China's Oil Stockpiles Offer Cushion Against Middle East Disruptions

China's economy may be better equipped to handle disruptions in global oil supplies due to ongoing tensions in the Middle East. The country, the world's largest crude oil importer, has several buffers that can help mitigate the impact of a potential oil shock.

According to Vivek Dhar, Head of Commodities and Sustainable Economics at Commonwealth Bank, China's ability to reduce imports is one reason why the oil market may be able to withstand more disruption than initially thought. One key factor in this is China's significant increase in oil stockpiles over the past year.

Between October 2024 and August 17, China built up its crude oil inventories, allowing it to store some of its unusually high imports for future use. This gives China room to cut purchases from overseas while still meeting domestic demand, with CommBank estimating a sustainable reduction in imports of around 2.5 million to 3 million barrels per day.

An additional factor helping reduce China's dependence on imported oil is the rapid growth of its electric vehicle market. The International Energy Agency estimates that electric vehicles displaced over 1.5 million barrels of Chinese road fuel use in the second quarter of 2026, up from around 600,000 barrels a day a year earlier.

Lastly, Dhar notes that Hormuz does not need to return fully to normal for oil flows through the Strait to be sufficient. With pipelines bypassing the Strait able to carry around 5 million barrels per day and non-OPEC+ oil supply outside the Middle East increasing, the market may already be closer to balance than initially thought.