China has a solid history of reducing oil imports in response to rising prices and increasing purchases when they fall. But the plunge in imports to a nearly 10-year low in June was dramatic—especially since, although prices jumped after the US and Israeli attack on Iran on February 28, they haven't reached the highs of 2022.

China's oil imports in June totaled 7.12 million barrels per day—the lowest since October 2016 and 41.3% lower than a year earlier, according to official data. Typically, a decline of this magnitude would have led to a sharp depletion of reserves, but that didn't happen. Instead, Chinese refineries reduced their utilization to 12.47 million bpd in June—17.7% lower than the same month in 2025, and the lowest since March 2020, during the COVID-19 pandemic.

China does not disclose the volumes of oil entering and disbursing from its strategic and commercial reserves, but an estimate can be made by subtracting refining volume from imports and domestic production. With imports of 7.12 million bpd and production of 4.41 million bpd, refiners had 11.53 million bpd available. They processed 12.27 million bpd—approximately 940,000 bpd drawn from reserves, compared to approximately 500,000 bpd in May. Despite depleting reserves over the last two months, China still replenished its reserves in the first half of the year, with a surplus of approximately 530,000 bpd.

China was able to sharply reduce refinery utilization in June, in part, because Beijing imposed unofficial restrictions on petroleum product exports—a measure seen as a way to ensure sufficient fuel supplies for the domestic market during the Middle East conflict.

China's exports of light and medium distillates in June totaled 393,000 bpd, according to Kpler analysts—slightly below the approximately 400,000 bpd in May, but above the 54-month low of 338,000 bpd in April.

There is no doubt that China played a significant role in adjusting oil demand during the current Iranian crisis, which has removed approximately 10 million bpd of crude and petroleum product supplies from the market due to the effective closure of the Strait of Hormuz. But China has also heightened tensions in the oil product market by cutting its exports since April.

The main question for the market is what China will do next. Prices will play a key role.

From a price perspective, China could be in store for another surprise. China's oil imports are likely to recover in August and September, as refineries likely bought up the cargoes that managed to leave the Strait of Hormuz during the brief ceasefire between the US and Iran.

Over this period, oil prices collapsed for about three weeks from mid-June, as the market anticipated a return to normal supplies from the Middle East and, consequently, a likely surplus. Brent futures fell to $70.14 per barrel on July 2, down from $126.41 at the end of April. However, the resumption of hostilities pushed Brent back above $90 per barrel. The price recovery will likely force Chinese refineries to slow down purchases again, meaning supplies will decline starting in October, given the lag between ordering and delivering batches.

The joker in the deck is what will happen to China's oil product exports. Beijing can now be confident that it can survive on its vast oil reserves, estimated at at least 1.2 billion barrels. China may also be tempted to increase refinery utilization and oil product exports in order to capture higher margins in Asia.

Gasoil, the base for diesel, closed at $143.03 per barrel on July 17, a $54.93 premium to Brent prices, almost triple the $18.94 premium in effect on February 27, the day before the US and Israeli attack on Iran. There are early signs that Beijing has eased informal restrictions on oil product exports, with light and middle distillate shipments at 787,000 b/d in July, according to Kpler.