June 02, 2026 [Reuters]- China is expected to tap deeper into its record crude oil inventories as refiners cut imports further while maintaining output ​curbs to minimize refining losses amid weak fuel demand, analysts and industry officials said.

Tepid demand from the world’s top crude importer is partly capping global ‌oil prices , which have fallen 19% in May even amid a strained ceasefire between the U.S. and Iran and with the Strait of Hormuz – through which a fifth of global oil supply usually passes – still largely closed for a third month.

Beijing has implemented a range of measures to insulate the country from soaring Middle East crude prices, including maximizing domestic oil drilling, curbing fuel exports and providing extra import quotas ​to encourage purchases of discounted Russian and Iranian oil.

May seaborne crude imports could fall to the lowest in a decade at 6.451 million barrels per day, ​from 8.1 million bpd in April, according to Kpler. Another ship-tracking firm, Vortexa, estimated May imports at 7 million to 7.5 million ⁠bpd. This comes after China’s overall crude imports in April slumped 20% on-year to 9.3 million bpd.

DRAWING ON COMMERCIAL STOCKPILES

To compensate for the lower imports, refiners have in the ​past three weeks drawn on commercial inventories at a rate of around 1 million bpd, tapping into a stockpile that last peaked around 1.25 billion barrels in early May, according ​to Vortexa and Kpler.

Ye Lin, a senior analyst with consultancy Rystad Energy, said, “China is allowing inventories to draw down gradually rather than bidding aggressively into a tight market – a choice that makes sense given how deeply negative margins have become.”

Vortexa’s lead China analyst, Emma Li, expects state-run refiners to accelerate stock draws as imports decline further.

Commercial stockpiles expanded by some 70 million barrels during the first four months ​of this year, a result of hefty purchases of Russian and Iranian oil by independent refiners and traders, and as larger refineries slashed output from March, according to Li.

Even ​if the drawdown rates quicken to 2 million bpd, the more than 200 million barrels built up since early 2025 are enough to last through mid-September, Li added.

With oil hovering not far from $100 ‌a barrel, ⁠Chinese refiners can afford to take a break from stockpiling in the near term thanks to large stock build before the war, traders said.

WIDENING REFINING LOSSES, SLOW DEMAND

Chinese refiners face losses of 600 yuan to 1,300 yuan ($88.74 to $192.26) for each metric ton of crude processed depending on grade as Beijing capped domestic pump prices to shield consumers from global price spikes, analysts said.

Large state-owned refineries led by Sinopec, the world’s largest refiner by capacity, and biggest independent processor Zhejiang Petrochemical Corp are set to maintain throughput curbs at least in June, ​trading and industry sources said.

Smaller plants known ​as teapots are under mounting pressure to ⁠trim runs in June and beyond despite a government order not to, according to teapot officials and analysts.

Several Shandong-based teapots are prepared to reduce or suspend processing after running down the crude stocks built in March and April, said an official briefed by plants ​during a recent visit to the refining hub.

Reflecting lacklustre demand, commercial gasoline and diesel inventories sampled and tracked by Chinese consultancy ​Oilchem stood at the ⁠highest since early 2024 and July 2024, respectively.

Gasoline demand destruction by electrification has become deeper than thought as higher petrol prices forced more lasting change in behaviour by prompting people to use more public transport, analysts said.

Michal Meidan, research head at Oxford Institute for Energy Studies, said China can sustain a 5% run cut versus the five-year average, which would require seaborne crude imports ⁠of 7.9 ​million bpd, a level in line with estimated imports for May.

“While there would be some mismatch between products ​and chemicals, and refining margins would suffer, basic supplies would still be guaranteed before stakeholders would need to massively draw stocks or return to the market,” Meidan wrote in a report last month.