China’s crude oil inventories likely increased significantly for the third consecutive month in May, potentially enabling Beijing to scale back purchases in the coming weeks as oil prices surge due to the Israel-Iran conflict.

According to energy expert Clyde Russell, China’s high stockpiles could allow refiners to reduce crude imports later this year, exerting downward pressure on global oil prices and perceived demand.

As China does not publicly disclose oil inventory data, Russell estimated stockpiling rates using official figures for imports, domestic production, and refinery processing.

His calculations indicate that China added approximately 1.4 million barrels per day (bpd) to its strategic and commercial crude reserves in May, representing the volume of available crude not processed by refineries.

This marks the third straight month of inventory builds exceeding 1 million bpd. The increase coincides with a 1.8% year-on-year decline in refinery crude processing in May, which fell to 13.92 million bpd—the lowest level in nine months—due to extensive seasonal maintenance at major state-run and private refineries, per data from the National Bureau of Statistics.

China ramped up crude imports in March and April, but the surge likely reflects strategic stockpiling of cheaper crude rather than a recovery in fuel demand.

This was driven by uncertainties surrounding future access to sanctioned oil supplies. The accumulated reserves could prove advantageous, allowing China to curb imports amid elevated prices fuelled by geopolitical tensions.

Oil prices climb

Meanwhile, oil prices surged on Tuesday, driven by heightened fears that escalating tensions between Iran and Israel could disrupt energy supplies from the Middle East, a region holding the majority of global oil reserves.

At 10:43am local time (0743 GMT), Brent crude, the international benchmark, rose 1.84% to $73.46 per barrel, up from $72.13 at the previous session’s close. Similarly, US benchmark West Texas Intermediate (WTI) gained 1.97%, trading at $71.39 per barrel, compared to $70.01 in the prior session.

Prices had briefly dipped to $69.96 on Monday amid reports that Iran sought to de-escalate hostilities and resume nuclear talks with the US However, the rebound followed provocative statements from US. President Donald Trump, who called for the evacuation of Tehran on his Truth Social platform, warning, “IRAN CAN NOT HAVE A NUCLEAR WEAPON.” He added, “Everyone should immediately evacuate Tehran!”

The White House announced that Trump would cut short his attendance at the G7 summit in Canada to return to Washington, citing “obvious reasons.” Fox News reported that Trump directed the National Security Council to convene in the White House Situation Room, further stoking concerns about potential conflict.

Tensions intensified after Israel launched coordinated airstrikes and drone attacks on Iranian military and nuclear facilities last Friday, prompting Tehran to retaliate with strikes of its own. These developments have amplified fears of supply disruptions, pushing oil prices higher.

Meanwhile, Axios reported on Monday, citing four sources, that the US is exploring a potential meeting this week between U.S. envoy Steve Witkoff and Iranian Foreign Minister Abbas Araghchi.

The discussions would aim to advance a diplomatic initiative, including a nuclear agreement and efforts to end the conflict between Israel and Iran.

Source: Oilprice.com, Anadolu