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China has secretly amassed the world’s largest oil reserves.
This is no mean feat for a country that is also the world’s largest energy importer.
This introduces a new dynamic in China-US relations as Premier Xi Jinping prepares to host President Donald Trump as a high-stakes state guest on May 14 and 15.
“Teapot” party
There is already controversy. China’s Ministry of Commerce has banned Chinese companies from complying with U.S. sanctions on small refineries that buy Iranian crude oil. So-called “teapot refineries” are encouraged by Chinese authorities to import Iranian crude oil because they are deemed immune to foreign sanctions, Teneo said. The agency warns that China’s failure to comply with sanctions could prompt the U.S. government to launch a second round of restrictive measures to strangle trade between China and Iran.
stockpiles
According to Kpler, oil markets are no longer dealing with flow disruptions, but rapidly worsening stock price shocks. The analysis group said most of the Middle East cargo loaded before the war is now unloaded, meaning inventory declines will accelerate and local refining will be delayed.
The U.S. Energy Information Administration (EIA) estimates that China will add an average of 1.1 million barrels of oil per day to its strategic stockpiles in 2025, and said ahead of the Iran conflict that “preliminary government data indicates China will continue to build up inventories in 2026.”
This means that China’s government and commercial oil reserves averaged approximately 360 million barrels as of December 2025, compared to approximately 414 million barrels of U.S. strategic stockpiles during the same period.
China’s oil hoarding is helping prevent oil prices from rising further amid the Strait of Hormuz impasse. It also provided a lifeline for importers in Asia, which have been most directly affected by the Middle East’s energy outages.
crude diplomacy
For China, rising tensions with the US and disruptions related to sanctions mean strategic oil reserves are acting as a hedge against supply constraints, price fluctuations and currency fluctuations, according to the Oxford Energy Institute.
The Iran war is expected to dominate President Trump’s meeting with Prime Minister Xi Jinping, potentially at the expense of other topics such as tariffs, rare earths and AI. Beijing’s quiet power play to build strategic oil reserves is changing the energy relationship between China and the United States, adding further complexity to this important meeting.
BUSAN, South Korea – October 30: U.S. President Donald Trump and Chinese President Xi Jinping react as they pose for a photo ahead of bilateral talks at Gimhae Air Base in Busan, South Korea, October 30, 2025. Trump will meet with Xi for the first time since taking office for his second term, after months of heightened tensions between the two countries. (Photo by Andrew Harnik/Getty Images)
Andrew Harnik | Getty Images News | Getty Images
This week’s highlights:
Monday: EU Foreign Affairs Council meeting
Tuesday: German inflation data, US inflation data
Wednesday: OPEC Monthly Oil Market Report, IEA Oil Market Report
Thursday: UK GDP data, BRICS Foreign Ministers Meeting
Friday: Credit ratings review: Germany, Italy, Ukraine
