Where exactly is the expected supply glut in the global crude market?
The best answer is China, which saw storage flows surge in December, resulting in a surplus of more than 1 million barrels per day for 2025.
China’s surplus of crude oil jumped to 2.67 million bpd in December, up from 1.88 million bpd in November and the most since the 2.27 million bpd seen in June 2020, when the world’s largest crude buyer was gorging on cheap oil at the height of the COVID-19 pandemic.
For 2025 the volume of surplus crude was 1.13 million bpd, largely steady from the 1.15 million bpd seen in 2024, according to calculations based on official data.
China does not disclose the volumes of crude flowing into or out of its strategic and commercial stockpiles, but an estimate can be made by deducting the amount of oil processed from the total crude available from imports and domestic output.
It is worth noting that not all the surplus crude was likely to have been added to storage, with some being processed in plants not captured by the official data.
But even allowing for those gaps, it is clear that from March 2025 onwards, China was importing crude at a far higher rate than necessary to meet domestic fuel demand.
December’s crude imports surged to a record 13.18 million bpd, up 17% from the same month in 2024, with the strong arrivals taking imports for the full year to 11.55 million bpd, another all-time peak and up 4.4% from the prior year.
Domestic crude production was 4.19 million bpd, while output for the full year was up 1.5% to 4.32 million bpd.
Combining December’s imports and domestic production yields 17.37 million bpd of crude available to refiners.
December refinery throughput was 14.7 million bpd, meaning that the monthly surplus was 2.67 million bpd.
For 2025 China’s refiners processed 14.75 million bpd, a record high exceeding the 14.7 million bpd from 2023.
Despite the increase in refinery throughput, the surplus for the year amounted to 1.13 million bpd as the total volume of available crude of 15.88 million bpd outweighed refinery processing of 14.75 million bpd.
The volume of surplus crude flowing into China largely answers the question as to where the global surplus of crude oil is.
WILL CHINA BUYING LAST?
Amin Nasser, the chief executive of the world’s largest oil exporter Saudi Aramco, told the Davos forum last week that “oil glut predictions are seriously exaggerated.”
That statement really only holds true for as long as China keeps buying way more oil than it needs to meet domestic demand and exports of refined products.
What would happen to the crude price if China pared back its imports by around 1 million bpd in 2026 from 2025 levels?
This would act as a drag on the crude price and make it challenging to outline a bullish case in the absence of a major supply interruption caused by geopolitical conflict.
The question is whether China is likely to continue boosting its crude stockpiles in 2026.
China has long aimed to build its strategic reserves by as much as 500 million barrels, meaning there is plenty of scope for it to continue to buy more than it needs to meet demand.
But the key factor will be price.
China has shown in the past that it tends to pull back on imports when oil prices rise too high or too quickly.
China made a rare draw on stockpiles in the first two months of 2025, a period after a rise in global benchmark Brent futures to a six-month high above $80 a barrel.
Similarly, China tends to boost imports when crude prices fall, with the recent strength in imports coming after Brent entered a sustained downtrend from July last year to an eight-month low of $58.72 a barrel by December 16.
It’s likely that China will continue to buy extra crude for as long as prices remain at levels deemed reasonable.
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The views expressed here are those of the author, a columnist for Reuters.
(Editing by Sonali Paul)