China, Not OPEC+, Is Now Setting the Boundaries of Oil Prices

For decades, the global oil market has operated on a simple assumption: producers, especially OPEC and its allies, determine prices by adjusting output. That belief was decisively challenged in 2025. The year marked a turning point in which China, the world’s largest crude oil importer, emerged not merely as a price-taker but as a de facto price stabiliser — shaping both the floor and the ceiling of oil prices through its control over storage flows rather than production.

How OPEC+ Lost Its Grip on Prices

Production cuts announced in 2022 by OPEC+ — grouping the Organization of the Petroleum Exporting Countries and allies led by Russia — initially succeeded in lifting prices. But those gains proved fragile. Once the group began reversing cuts in April 2025, prices softened quickly, exposing the limits of producer control in an increasingly demand-driven market.

Facing the prospect of a looming oil glut, OPEC+ has now opted to hold production steady through the first quarter of 2026. That decision effectively shifts the burden of absorbing surplus supply onto consumers — and above all, onto China.

China’s Storage Strategy as a Market Signal

What distinguished 2025 was China’s systematic use of crude storage to smooth price swings. When prices fell, Chinese buyers increased imports well beyond immediate consumption needs, diverting excess barrels into strategic and commercial storage. When prices rose, purchases were pared back.

This behaviour created an implicit price corridor. Oil did not collapse under surplus supply, nor did it spike dramatically during geopolitical shocks. Instead, prices remained range-bound — not because producers fine-tuned output, but because China modulated demand.

What the Numbers Reveal — Despite Limited Transparency

China does not disclose data on crude flows into or out of its strategic or commercial stockpiles, complicating direct analysis. However, storage activity can be inferred by subtracting refinery throughput from total crude availability (imports plus domestic production).

For the first 11 months of 2025:

• Total crude available: ~15.80 million barrels per day (bpd)
• Refinery processing: ~14.82 million bpd
• Implied surplus: ~980,000 bpd

This surplus accumulation began in March, following an unusual inventory draw in January–February, when refiners processed about 30,000 bpd more crude than was available.

The Price Link: Buying Low, Pulling Back High

The correlation between China’s surplus crude and global prices is striking. When prices rose sharply mid-year, surplus buying fell. In September, excess crude dropped to about 570,000 bpd after peaking at 1.10 million bpd in August.

These September cargoes had largely been contracted in June, during the Israel–Iran conflict, when Brent crude spiked to a six-month high of $81.40 a barrel on June 23. As prices eased in the following months, Chinese refiners resumed aggressive buying. By November, surplus crude surged to 1.88 million bpd — the highest since April and nearly triple October levels.

Why Prices Stayed Anchored in Late 2025

This storage-driven demand management helps explain why crude prices remained locked in a relatively narrow band in the second half of 2025, with Brent oscillating around $65 a barrel. In effect, China absorbed excess supply when prices dipped and withdrew demand when prices rose, dampening volatility.

In doing so, Beijing played a role traditionally associated with swing producers — without cutting or adding a single barrel of production.

The Big Unknown for 2026: How Much More Can China Store?

The critical question now is whether China can — and will — continue to act as the world’s shock absorber in 2026. Estimates of China’s current crude inventories vary widely, from about 1 billion to 1.4 billion barrels.

Using the benchmark of 90 days of import cover, and assuming baseline imports of around 11 million bpd, roughly 1 billion barrels would suffice. However, analysts estimate that around 700 million barrels are commercial inventories, implying a strategic reserve closer to 500 million barrels.

That suggests China may still aim to add another 500 million barrels to its strategic stockpile. The uncertainty lies in timing and political intent.

Why Beijing Now Sets the Market’s Tone

With OPEC+ constrained by internal discipline and geopolitical limits, China’s opaque but powerful role has become the dominant variable in oil markets. Other participants — producers, traders and refiners — are increasingly setting strategies based on what Beijing might do next.

In this new oil order, production decisions still matter. But prices are no longer determined solely at the wellhead. They are increasingly shaped at the storage tank — and China controls more of those levers than any other player.