Country Brief: China

Energy Profile

Metric	Value
Crude oil imports	~11M+ bbl/day (world’s largest importer)
Domestic production	~4.9M bbl/day
Total crude consumption	~16M bbl/day
Hormuz-dependent imports	~4.4-5.0M bbl/day (~40-45% of crude imports)
Iranian crude imports	~1.2M bbl/day (~1.4M pre-crisis baseline; ~90% of Iran’s exports)
Russian crude imports	~2.09M bbl/day (Feb 2026 record; largest single supplier)
Strategic reserves (SPR)	~1.2 billion barrels onshore stockpiles
SPR import cover	80-104 days of net imports
LNG imports via Hormuz	~30% of total LNG imports (from Qatar/UAE)
LNG inventories	7.6 million tons

Key Infrastructure

• Zhoushan SPR Base (Zhejiang): ~33M barrels capacity, largest single SPR site; coastal
• Dalian SPR Base (Liaoning): ~19M barrels capacity; northeast, near Russian ESPO pipeline terminus
• Zhanjiang SPR Base (Guangdong): ~20M barrels capacity (southern China)
• ESPO Pipeline (Russia): East Siberia-Pacific Ocean; ~1.6M bbl/day capacity; direct overland crude supply
• Power of Siberia Pipeline (Russia): Natural gas; 38 Bcm/year capacity (ramping); Siberian gas to northeast China
• Kazakhstan-China Pipeline: ~400K bbl/day capacity; Central Asian crude overland supply
• Myanmar-China Pipeline: ~440K bbl/day design capacity; bypasses Malacca Strait for Middle Eastern crude
• Shandong Independent Refineries (“Teapots”): ~4.5M bbl/day combined capacity; process ~25% of China’s crude; heavily reliant on Iranian/Russian discounted crude

Key Actors

• CNPC (China National Petroleum Corporation): largest state oil company; operates PetroChina; upstream/midstream dominant
• Sinopec (China Petrochemical Corporation): largest refiner; downstream dominant; major crude importer
• CNOOC (China National Offshore Oil Corporation): offshore production; LNG imports
• PetroChina: CNPC’s listed subsidiary; pipeline operator; refiner
• State Reserve Bureau (SRB): manages national strategic petroleum reserves
• Shandong teapot refineries: ~40+ independent refineries; heavily exposed to Iranian/Russian crude supply disruption

Crisis Exposure (Hormuz Crisis, Day 94 - Fragile Ceasefire, MoU Unsigned)

• 40-45% of crude imports and ~30% of LNG imports transit Hormuz; significant but not total exposure
• Strait open on paper, near-dead in practice. Iran “declared open” since mid-April, but open transits have run near zero since ~May 6. ~600 tankers are stranded inside the Gulf and ~240 waiting outside. Mines laid by Iran are uncleared. The “dual blockade” persists: Iran throttles the Gulf, the US blockades Iranian ports (since Apr 13)
• China is the dominant buyer of Iranian crude (~90% of Iran’s exports) and the largest importer of Gulf crude overall. That makes Beijing the single most exposed major economy to the choke, and also the actor with the most to gain from distressed, discounted barrels if flows resume
• Shadow fleet is the shock absorber. Sanctioned/dark tankers (aging, often uninsured, ship-to-ship transfers, flag-switching) carry most Iranian barrels to Chinese teapots via Malaysian-blend relabeling. ~1/3 of the global shadow-fleet flow (~10M bbl/day in 2025) lands in China. Iranian deliveries had already eased from ~1.25M bbl/day (Jan) to ~1.0M bbl/day (Feb) as cheap Russian grades displaced them; the choke has compressed Iranian inflows further
• COSCO turnback (Mar 28) showed the limits of being Iran’s biggest customer. IRGC Navy turned back CSCL Indian Ocean and CSCL Arctic Ocean near Larak Island and declared Hormuz “closed,” killing the yuan-settlement toll corridor that had moved ~20 Chinese-flagged ships since Mar 13. China holds no veto over Tehran’s blockade decisions
• US blockade of Iranian ports (since Apr 13) is the live flashpoint. Washington is interdicting a sanctioned trading partner that supplies Beijing’s teapots. The US Treasury warned banks of sanctions risk over Chinese teapot purchases of Iranian oil (late Apr). Beijing has pushed back rhetorically and kept buying; enforcement against the shadow fleet remains the friction point
• Wang Yi pushing talks (since Mar 25): China’s top diplomat has urged Iran toward negotiation throughout. Beijing favors any settlement that reopens Hormuz toll-free and restores its Iranian/Gulf supply, but its leverage over Tehran is limited
• Fuel-export suspension (early Mar) held as a conservation signal, retaining product for the domestic market
• Pivot to Russian crude is the primary hedge: ESPO loadings hit multi-year highs through Q1 (record seaborne Russian flows ~1.86M bbl/day to China in Jan); Russian grades at ~$8-9/bbl discounts to Brent
• SPR (~1.2B bbl, ~80-109 days of import cover) accumulated cheaply over years of sanctioned buying. Drawing on it and on pre-loaded cargoes rather than sharing with allies or Pakistan
• MoU implication (May 28, unsigned): the tentative 60-day deal would reopen Hormuz with no tolls and clear mines, lift the US port blockade, and issue some Iranian sanctions waivers. For China that means cheaper, freer Gulf and Iranian barrels. But Trump added demands (May 29-30), Tehran has not finalized, and US “defensive strikes” plus an Iranian missile salvo on Kuwait in late May show the truce is loose. Hormuz could reopen for China within weeks or stay choked

EV Adoption & Oil Demand Dynamics

• New energy vehicle (NEV) penetration exceeded 50% of new car sales in 2025, the world’s fastest EV transition
• EV adoption displacing ~1.0-1.5M bbl/day of gasoline demand growth that would otherwise have materialized
• Net effect: China’s oil demand growth is flattening; crisis accelerates structural shift away from oil dependency
• However, diesel (trucking, construction, agriculture) and petrochemical feedstock demand remain oil-dependent. EVs do not address these sectors
• Shandong teapot refineries (~25% of China’s throughput) are most exposed: reliant on discounted Iranian crude now throttled by the choke and squeezed by US sanctions warnings. Many lack the scale or complexity to pivot to alternative grades quickly, and they run on the shadow fleet that the US blockade is targeting

Structural Vulnerabilities

• Must compete for Atlantic basin cargoes (West Africa, Brazil, US) if Hormuz crisis persists, bidding against Europe and other Asian importers
• Economic slowdown compounds strain. Property sector weakness and export headwinds reduce fiscal flexibility
• No leverage over Iran despite being its largest oil customer (~90% of Iran’s exports go to China). The COSCO vessel turnback (Mar 28) and the near-zero transits since ~May 6 show Beijing cannot dictate access
• Shandong teapot refineries face crude quality mismatch if forced off Iranian/Russian discounted barrels
• Malacca Strait remains a secondary chokepoint for seaborne crude from Africa/Americas
• Overland oil pipelines (ESPO, Myanmar, Kazakhstan) provide partial but not full offset; combined crude capacity ~2.4M bbl/day vs ~11M bbl/day seaborne imports
• CPEC lacks oil/gas pipeline infrastructure. Gwadar-Kashgar oil pipeline shelved; no energy supply corridor to Pakistan
• LNG exposure: 30% of LNG imports from Hormuz-dependent sources; gas-fired power and heating in northern cities at risk

TankerBrief Coverage Angle

Asian commodity trading desks (Singapore/Shanghai), VLCC charterers, China-focused hedge funds, defense/intelligence analysts monitoring PLAN activity, teapot refinery operators, and sanctions-compliance teams at banks exposed to Iranian-oil flows. At Day 94 they need: whether the 60-day MoU gets signed and reopens Hormuz toll-free (the base case for cheaper Chinese barrels), shadow-fleet and dark-tanker movements feeding Shandong teapots, US enforcement against teapot buyers and the blockade of Iranian ports (the live flashpoint), Iranian crude inflows to China vs Russian ESPO substitution, SPR drawdown signals against the ~1.2B bbl stockpile, Shandong teapot utilization, ~600 tankers stranded inside the Gulf, and whether Wang Yi’s diplomacy gains China a seat in shaping the reopening terms rather than just absorbing the shock.