In October, China’s crude Oil processing reached nearly 15 million barrels per day, showing a 6.5% increase from the previous year, as reported by the National Bureau of Statistics. During the first ten months, Chinese refineries processed 4% more crude Oil than the same period the previous year, suggesting an annual increase.
The buildup of stocks reached 690,000 barrels per day in October, slightly more than the previous month but lower compared to earlier in the year. This stockpiling raises questions about the duration of these purchases and their impact on absorbing the Oil market’s oversupply.
Market Observations
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Based on data from this past October, we see that China’s crude oil processing remains very strong, hitting nearly 15 million barrels per day. While this is a small dip from September, it marks a significant 6.5% increase compared to the same time last year in 2024. This trend suggests that overall demand for 2025 will show a solid year-over-year increase.
These figures show China is not only refining more oil but also continuing to build its strategic reserves, adding about 690,000 barrels per day to its stockpiles in October. This buying has been a key reason the oil market has been able to absorb the global oversupply we’ve seen this year. The consistent purchasing has provided a floor for crude prices when they might have otherwise fallen.
Adding to this, recent data from the U.S. Energy Information Administration confirmed a surprise draw in American crude inventories last week, with stocks falling by 2.1 million barrels. This tightening in the U.S. market, paired with China’s demand, reinforces the current support for prices. We are seeing WTI crude futures for December delivery hold steady above $85 per barrel as a result.
Supportive Outlook
The bigger picture for China also looks supportive, as their industrial production for October grew 4.8%, beating most analysts’ expectations. This tells us the demand for refined products like diesel and gasoline is tied to real economic activity, not just stockpiling. Looking back at the volatility of 2023, this period feels more stable, though dependent on this single source of demand.
The main question for us is how long China will continue buying oil beyond its immediate needs. These inventory builds are effectively removing excess supply from the market, but this strategy will not last forever. Any signal that China is slowing its stockpile purchases could quickly shift market sentiment and expose the underlying oversupply.
For traders, this creates a tricky situation for the weeks ahead leading into the new year. Short-term call options on Brent and WTI seem reasonable, given the strong immediate demand signals. However, we should also consider buying puts for delivery in the first quarter of 2026 to hedge against a potential drop if China’s stockpiling pace suddenly decelerates.
