China can’t be counted on to absorb global crude surplus as Opec+ bumps up production: market watchers

[SINGAPORE] The crude oil market is embracing a rising supply glut that will not be simply resolved by China’s stockpiling, said market watchers at the Asia-Pacific Petroleum Conference 2025 (APPEC 2025) on Monday (Sep 8).

The world’s largest oil-importing country has been absorbing the world’s crude surplus by consistently stockpiling and building up its strategic reserve for energy security. However, a potentially slowing pace of its inventory-building foreshadows a plunge in crude price as the supply glut grows.

The oversupply situation of crude could worsen as China’s commercial crude demand is expected to peak in these two years, noted Han Guangzhong, vice-president, CNOOC Energy Economics Institute, at a panel discussion.

“Crude oil demand is expected to peak before 2030, most probably this year or next year. The peak level is about 770 million tonnes a year,” he noted.

While China’s economic growth slows, its demand for oil products, which range from clean products to liquefied petroleum gas, is expected to peak around 2027, said Fairy Wang, vice-president of Sinopec Economics and Development Institute.

Crude to trade below US$60 a barrel by end-2025

The “massive excess” of crude expected this year, especially after Opec+’s decision to unwind output cuts at an accelerated rate since April, will not be solved by China alone, said Frederic Lasserre, global head of research and analysis at Gunvor Group, in a separate panel.

The Opec+ decision on Sunday to raise production again comes on top of already rising output by non-Opec+ countries such as the US and Brazil, adding to mounting concerns that global oil markets could tip into surplus well into 2026.

China has been stockpiling crude in its reserve at a rate of 530,000 barrels a day, which exceeds global oil demand, presented Jim Burkhard, global head of crude oil market research at S&P Global Commodity Insights.

He estimates that China’s crude oil inventory stands at 1.4 billion barrels, “way more than any other country”, and its massive stockpiling has absorbed much of the global crude surplus so far this year. “Will China continue to build (its crude inventory) at the same pace for the rest of this year? That is the key question facing the oil market.”

He expects China’s inventory builds to slow down, and the price of Dated Brent to drop more than US$10 a barrel by year-end, as global supply could be more than thrice the global demand by end-2025.

This would mean crude prices falling below US$60 a barrel mark by year-end. The price was at around US$66 a barrel on Monday morning.

“The deceleration in China’s stockpiling is a really important assumption in our outlook that we think will contribute to the surplus being visible outside China before the end of the year,” said Burkhard. He added that other countries’ inventory builds could offer some demand boost, though not at a scale of China’s.

India’s fast growth, despite being from a low base, could also add up to stronger crude demand over time, said Saad Rahim, chief economist at Trafigura.

Still, if China’s reserve stockpiling slows, there would be no other crude demand drivers that can match magnitude of the builds, Rahim emphasised. “We are not sure where that demand would come from... Even if we were to revise up a lot of macro-demand forecasts – whereas everyone is revising down – would that be enough demand to absorb this (surplus)?” he asked.