How China's Reserve Drawdown and Import Cuts Capped Global Crude Prices During the 2026 Strait of Hormuz Crisis

When Iran effectively closed the Strait of Hormuz in late February 2026, nearly 20% of the world's oil supply was cut off. Markets braced for crude prices to surge past $200 per barrel. But by late April, Brent peaked at roughly $126/bbl, and by early July — after the strait reopened — it had fallen back to ~$70.78 . The primary reason: China's aggressive drawdown of its enormous strategic petroleum reserves and a steep, deliberate reduction in its crude imports that absorbed roughly one-third of the entire supply gap .

China's Pre-Crisis Reserve Position

China entered 2026 with an estimated ~1.4 billion barrels in combined commercial and strategic crude oil reserves, built up over more than a year of aggressive pre-crisis buying that added roughly 1.1 million barrels per day (mb/d) through 2025 . That stockpile was more than three times the size of the U.S. Strategic Petroleum Reserve, which held ~413 million barrels in December 2025 .

The Oxford Institute for Energy Studies estimated China's total crude stocks at 1.1–1.3 billion barrels, equivalent to 110–140 days of import cover . Roughly 45–50% of China's crude imports transited the Strait of Hormuz, making this buffer critical .

How the Drawdown Capped Prices

China's crisis response combined two levers: drawing down stored reserves and slashing new imports. Together, they removed enough demand from the global market to prevent a far more severe price spike.

1. Reserve drawdowns replaced lost imports. China began tapping commercial reserves as early as March 2026, with consultant FGE NexantECA forecasting drawdowns of up to 1 mb/d over four to six weeks . By June, inventory draws were averaging about 1 mb/d, offsetting roughly one-third of the crude China was no longer receiving through Hormuz .

2. Crude imports collapsed to decade lows. China slashed its crude imports from 11.7 mb/d in February 2026 to just below 9 mb/d by late May, and then to a decade-low ~7.12 mb/d in June (29.27 million tons) . Seaborne imports alone fell to around 6.6–6.7 mb/d in May . That ~4–5 mb/d reduction in Chinese demand absorbed roughly one-third of the total offline Middle Eastern supply, which was estimated at 12–15 mb/d . J.P. Morgan analysts estimated that China's reduction accounted for approximately 74% of the overall decrease in global crude imports — a "disproportionate" contribution that kept oil prices "remarkably steady" .

3. This prevented a much worse price spike. While Brent crude surged above $126/bbl in late April, many analysts had predicted prices would far exceed those levels . Fortune reported that "analysts have China's trade activity to thank" for prices staying below $100–$104 for extended periods . CNBC noted that Beijing's decision to slash imports and tap reserves "alleviated the supply shock" and played a "pivotal" stabilizing role alongside U.S. SPR releases and the IEA's coordinated 400 million-barrel release .

Analyst Views on Reserve Position & Import Reductions

• Reserves remained "comparatively robust" even after the drawdown. MUFG Americas noted that China's strategic position was far stronger than the U.S. SPR, which had fallen to a four-decade low . Bloomberg reported that even after tapping commercial stocks, China still held roughly 1.2 billion barrels across its commercial and strategic stockpiles as of June .

• The import cut was described as "the single biggest demand buffer" that capped oil price gains from March through June . Analysts at Semafor noted that China's decision to sharply reduce imports became "an equally important factor in market fundamentals" as the Hormuz closure itself .

• By early July, with the strait reopened, Brent had fallen to ~$70.78/bbl and WTI to ~$67.74/bbl . Morgan Stanley cut oil forecasts twice in two weeks, warning of a potential glut driven partly by China's continued weak imports .

Outlook for Future Purchasing Patterns

Restocking expected later in 2026 and 2027. Reuters reported in July 2026 that governments — including China — are set to buy millions of barrels through 2028 to rebuild emergency reserves depleted by crisis-era drawdowns. Analysts said "lower oil prices could spur Chinese reserve buying" and that "SPR restocking will lead to a higher price floor" . That restocking could generate an additional 506,000 barrels per day of crude demand in Q4 2026, rising further in 2027 .

Bloomberg reported on July 13 that China's crude imports "look poised to recover" as Beijing relaxes fuel export curbs, raises refinery run rates, and snaps up prompt Middle East supplies, with analysts and traders forecasting a return to strategic stockpiling later in 2026 .

Key risk flagged by analysts: China's eventual return to the market as a buyer removes the single biggest demand buffer that kept prices contained. OilPrice.com warned that China's re-entry into crude purchases would remove "the single biggest demand buffer that capped oil price gains in March–June," potentially creating upward pressure as Beijing restocks .

However, near-term headwinds remain. Many Chinese refineries were scheduled for maintenance through mid-2026, and weak refining margins could delay the pace of recovery . In June, Chinese refiners paused spot buying as they eyed the strait's reopening, suggesting that the rebound may be gradual rather than immediate .