China’s energy reforms spur commercial crude stockpiling

China’s sweeping energy policy reforms are reshaping the landscape of the country’s crude oil storage. According to the International Energy Agency (IEA) and Kayrros, China recorded an estimated 82-million bbl increase in crude inventories during second-quarter 2025. The surge—one of its largest quarterly builds on record—contributed significantly to global stock increases despite backwardated crude prices, indicating that strategic policy drivers complimented market incentives.

The inventory growth was concentrated in commercial storage sites, with only modest additions to the country’s strategic petroleum reserves (SPR). The sharp rise in commercial inventories in second-quarter 2025 was not solely a market response, but was underpinned by major institutional and policy developments aimed at enhancing long-term energy security, said IEA.

A major catalyst was enactment of China’s Energy Law on January 1, 2025, which for the first time made the establishment of strategic reserves a legal obligation for both state-owned and private companies. The legislation clarified corporate responsibilities and set the groundwork for a more coordinated stockpiling effort.

In line with the new policy, national oil giants China National Petroleum Corp. and China National Offshore Oil Corp. launched dedicated oil reserve subsidiaries in February. In May, the Commercial Reserve Sub-Committee was established under the Petroleum Chamber of the All-China Federation of Industry and Commerce. It provides a formal structure to mobilize companies to develop commercial reserves and enhance coordination between state and non-state actors.

“The shift toward commercial stockpiling reflects the limits of the government’s SPR storage facilities, with utilization of existing capacity reported at around 80%. Any new capacity additions will have a long lead time to build and become operational. By contrast, commercial storage facilities remain underutilized, currently filled at roughly 50% of capacity, offering ample space to build stocks,” said IEA.

“Chinese companies are evolving from short-term importers to long-term strategic partners for the government. Their operational flexibility, storage infrastructure, and responsiveness will facilitate the development of capacity and inventories to meet the government’s goals. Backed by fiscal incentives and regional support, they are expected to drive future commercial reserve expansion. This new government-led commercial approach helps meet China’s energy security goals of building more stocks and can also smooth global market imbalances at times.”