Key facts
- China added an estimated 200,000 barrels per day (bpd) to its crude oil reserves in July.
- Crude oil imports into China rebounded in July from a decade-low in June.
- Refinery processing rates in China remained depressed in July.
- Japan has diversified its crude oil sources and released strategic reserves due to Middle East supply disruptions.
- Japan's crude oil import bill hit a record $89.46 billion in June.
China is estimated to have added approximately 200,000 barrels per day (bpd) of crude oil to its reserves in July, a reversal from earlier drawdowns. This occurred as crude oil imports rebounded from a decade-low in June, while refinery processing rates remained depressed. Analysts estimate China's total crude oil stockpile has largely remained intact at about 1.2 billion barrels. This trend of adding to reserves in July contrasts with the United States and other major oil consumers, which began drawing down stockpiles earlier. The calculations are based on overall supply, including domestic production and imports, against refinery processing rates. The rebound in imports and continued stockpiling may indicate persistent weakness in China's domestic demand and refining volumes, even amidst disruptions in the Strait of Hormuz.
Meanwhile, Japan has eased its oil crisis by diversifying crude purchases and releasing strategic reserves, moving away from its 90% dependence on Middle Eastern crude. However, the economic cost of sourcing oil from distant locations to offset lost deliveries from the Strait of Hormuz remains high, with soaring import bills impacting industrial and economic activity. A June survey indicated that as much as 90% of Japanese companies reported negative impacts from rising energy prices. Japan imported the lowest volume of Middle Eastern crude on record in April, and its crude oil import bill hit a record $89.46 billion in June.