China Expands Oil Storage Capacity with 11 New Sites

China is set to enhance its oil storage capabilities by constructing 11 new storage sites over the next two years. This initiative aims to build up reserves while crude oil prices remain low. According to a report from Reuters, these new facilities will collectively hold approximately 169 million barrels of crude oil, which is equivalent to about two weeks’ worth of China’s crude oil imports.

The current expansion follows previous storage capacity increases that amounted to between 180 million and 190 million barrels from 2020 to 2024, as per data from Vortexa and Kpler. China has been purchasing more crude oil than it can currently consume or export, capitalizing on stable prices and discounts on sanctioned crude from Russia and Iran.

The Chinese government does not publicly disclose its inventory levels; however, industry analysts estimate these figures based on import data and refinery activity. For instance, in August, China was reportedly stockpiling crude at a rate of 1 million barrels daily. The average stockpiling rate for the year has been around 990,000 barrels each day. Projections indicate that this rate may decrease to roughly 500,000 barrels daily over the next year, according to Goldman Sachs analyst Daan Struyven.

Market Outlook and Concerns

Despite China’s increased inventory purchases, many analysts express concerns about an impending oversupply in the oil market. Predictions suggest that an oversupply could manifest either by the end of this year or in 2026, potentially driving prices lower. Some analysts foresee Brent crude prices falling to around $50 per barrel, with others suggesting it may dip even further.

Goldman Sachs estimates a supply surplus of approximately 1.9 million barrels daily. The International Energy Agency has warned of a record surplus that could reach as high as 3 million barrels daily. Key factors contributing to this outlook include strong production from the U.S. shale sector, albeit at a slower growth pace, sluggish demand growth, and increases in output from OPEC+, which, despite efforts, are falling short of production targets.

As China continues to build its oil reserves, the global market remains on alert for shifts in supply and demand dynamics that could influence pricing and availability in the coming months.