China Expands Oil Storage Capacity with 11 New Sites by 2025

China is set to enhance its oil storage infrastructure by constructing a total of 11 new sites over the next two years. This initiative aims to capitalize on the current low crude prices, allowing the nation to stockpile substantial reserves. According to a report from Reuters, the combined storage capacity of these new sites will reach approximately 169 million barrels, enough to cover about two weeks of the country’s crude oil imports.

The planned expansion comes as China has been purchasing crude oil at a rate that exceeds its consumption and export capabilities. This trend has been ongoing for several months, driven by favorable pricing and discounts on sanctioned oil sourced from Russia and Iran. While China does not publicly disclose its inventory figures, analysts estimate stock levels based on data regarding imports and refinery operations.

Stockpiling Trends and Future Projections

In August, China was reportedly stockpiling crude oil at a rate of 1 million barrels daily. For the year to date, this average rate has hovered around 990,000 barrels daily. Projections from Goldman Sachs, particularly from analyst Daan Struyven, suggest that this rate may decrease to approximately 500,000 barrels daily over the next year.

Despite China’s aggressive inventory accumulation, the outlook for the oil market remains cautious. Many commodity analysts anticipate that the market may shift towards oversupply by the end of this year or in 2026. This potential oversupply could lead to lower prices, with some forecasts indicating that Brent crude could fall to as low as $50 per barrel or even dip below that threshold.

According to Goldman Sachs, the projected supply overhang could reach around 1.9 million barrels daily. The International Energy Agency has suggested that this overhang might escalate to a record of 3 million barrels daily. Analysts attribute this potential oversupply to several factors, including robust production from the U.S. shale sector, which, despite experiencing slower growth, continues to contribute significantly to global supply.

In addition to U.S. production, sluggish demand growth and increased output from OPEC+—despite falling short of established targets—are contributing to the anticipated oversupply. As the global oil market evolves, China’s strategy to build new storage facilities underscores its proactive approach to securing energy resources amid fluctuating market conditions.