Oil instead of dollars: why China replenishes reserves with black gold
Oil producers are rapidly unwinding the supply flywheel. This week, exports of black gold from Saudi Arabia reached an 18-month high of 6.42 million barrels per day. Despite this growth, oil prices remain fairly stable, staying in the range of $ 60-70 per barrel. One of the reasons for this may be the efforts of China, which has been buying oil into its strategic reserve for many months. Why is China doing this and why long—term industrial reserves are needed in general - in the Izvestia material.
Oil holds up despite OPEC+
OPEC+ is increasing production almost every month this year. The oil cartel and its affiliated group of countries, led by Russia, ignore moderately negative news from the global economy (tariffs, trade wars, the unsatisfactory economic situation of the European Union, the growth of green energy and the electric vehicle industry), primarily seeking to regain their market share.
On October 5, the group's countries discussed the time frame for adding 1.66 million barrels to the market (in particular, in November — by 137 thousand barrels per day), which were frozen in previous years amid the need to maintain prices at an acceptable level. Since the beginning of May, more than 2.3 million barrels have entered the market. The leader of the process is Saudi Arabia, which suffered the greatest losses during the introduction of production restrictions and is now recovering what was lost. It is worth noting that in addition, several other non—OPEC+ countries have increased their supply - Brazil, Guyana and Canada.
Such a sharp increase in supply should have had a significant impact on prices. However, so far the effect is very moderate. The Brent brand, for example, is now worth about $65 per barrel, despite the almost 2 million barrels of excess that may form in the world according to the IEA forecast. There is no particular downward trend yet. And, apparently, China's purchases play an important role here.
China's oil consumption is unlikely to grow that much this year — most forecasts indicate a modest range of 50-100 thousand barrels per day above last year's figures. This is very small, given the overall growth of the Chinese economy. This situation is developing due to the ultrafast electrification of a significant part of the Chinese fleet. China produces more electric trains than any other country in the world, by a huge margin, but tariff wars are currently forcing manufacturers like BYD to concentrate on the domestic market (although external sales are growing, just more slowly than Chinese corporations would like).
2 billion barrels
The other side of the coin is that China has recently been rapidly increasing its injections into its state oil reserve. This year alone, China has purchased about 150 million barrels of oil for these purposes. This figure is likely to increase by the end of the year. Replenishment was particularly active in the second quarter, when the International Energy Agency estimated that China accounted for more than 90% of the global inventory available for assessment. At the annual Asia-Pacific Petroleum Conference in Singapore last week, traders agreed that China has the capacity to store much more oil than it currently does.
The Chinese strategic oil reserve is a fairly new thing. Until the mid-1990s, the country did not need it at all, as it produced more than it could consume. In the 2000s, amid sharp fluctuations in oil prices, it was decided to create such an infrastructure. The first stage of storage facilities, commissioned in 2009, held 100 million barrels, and additional facilities for another 170 million barrels were opened by 2011. Since then, the volume of these repositories has continued to grow.
In an interview with Izvestia, the project manager of the Implementation consulting company noted that the replenishment of China's strategic reserves remains an important factor supporting global oil prices.
— As of August 2025, the total volume of oil in Chinese storage facilities, including strategic and commercial reserves, reached 1.2 billion barrels, which corresponds to about 60% of the total storage capacity, estimated at about 2 billion barrels.
In turn, Finam analyst Nikolay Dudchenko said that record accumulated reserves of about 1.18 billion barrels were reported.
"At the same time, the occupancy of onshore storage facilities is slightly over 60%, so China can continue to increase purchases," he says.
Black and gold and foreign exchange reserves
Thus, China can buy for a long time and can safely remove up to a million barrels per day or even more from the market, given that new storage facilities continue to be commissioned even this year. Why does the world's second largest economy need this?
Bloomberg previously noted that Chinese officials in charge of commodities have demonstrated that they are astute traders (just look at their copper purchases), acting with a very long-term perspective. And oil is cheap now. In real terms, taking into account the cumulative impact of inflation, the oil of the most popular American brand WTI is trading at about the same level as it was 20 years ago.
In addition, this year the Chinese government has established new regulations that have actually increased the need for storage. The energy law, which entered into force on January 1, for the first time established strategic reserves as a legal requirement for public and private companies. In fact, the state shares responsibility for the creation of reserves with the commercial sector, laying the legal basis for increasing total oil reserves. Apparently, this decree played an important role in increasing purchases.
In addition, China has realized that it needs to strengthen its energy security in a world where the United States applies sanctions and duties as they please. Today, China buys 20% of its oil from countries under US sanctions, mainly Iran, Russia and Venezuela. None of them can guarantee that the United States will not be able to at least impede these supplies in the future. Building up stocks is just prudent. However, it is not completely clear what can be considered sufficient. Currently, China's reserves are equivalent to 110 days of consumption. By 2026, this figure may be increased to 140-180 days.
Finally, China may consider oil as an alternative to U.S. Treasury bonds. This is a unique way to reduce its dependence on American assets and diversify its gold and foreign exchange reserves.
It turned out that in 2025, international reserves are provided not only by gold, but also by oil. The line of thought is not orthodox at all, but, given the trends of international politics and economics, it is quite legitimate.
There are suspicions that China will not be alone in this movement. At the moment, the most famous strategic oil reserve in the world is the American one. Its potential capacity is more than 700 million barrels, which is less than China's (but it must be remembered that Chinese facilities include both government and commercial storage facilities, so a head-on comparison is incorrect). The cash volume now reaches 395 million barrels. Since 2021, this American reserve "for a rainy day" has been reduced by more than one and a half times. The initiator of the sale of the reserve was the Joe Biden administration, which was trying to lower oil prices.
The national Oil Reserve is not cheap and requires significant efforts. Nevertheless, such facilities will surely grow in importance in the coming years. This is influenced by the need to maintain supply stability in the face of an escalating international situation, and the desire to diversify their assets during times of sanctions and trade wars. At the same time, such reserves can become a powerful source of balancing oil prices, which is happening right before our eyes.
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