China to Draw Down Record Oil Inventories to Limit Refinery Losses Amid Weak Fuel Demand

China is expected to draw down its record crude oil inventories to limit losses at refineries as fuel demand stays weak, according to Asharq Al-Awsat. Analysts and oil sector officials cited by the paper say the withdrawals are likely to become larger, reflecting the pressure on China’s oil market as consumption remains soft.

The reports describe a country sitting on unusually large stockpiles after months of heavy inventory building. The U.S. Energy Information Administration estimated that China’s strategic oil inventories reached nearly 1.4 billion barrels by December 2025, the largest among major oil stockpilers, with government-held inventories around 360 million barrels and commercial stocks also high. That scale gives Beijing room to manage market swings, but it also means any shift in policy could have a noticeable effect on global crude balances.

The expected drawdown matters because China is one of the world’s biggest oil importers and a key driver of demand. If refiners reduce runs or rely more heavily on stored crude instead of fresh imports, that can ease losses at home while also weakening near-term demand in international markets. For producers, especially those already facing uneven demand growth, China’s stock decisions can influence prices and trade flows.

Asharq Al-Awsat said the move would be aimed at cushioning refinery losses caused by weak fuel consumption. That suggests China is responding not just to crude prices, but to the profitability of converting oil into gasoline, diesel, and other products. When demand for those fuels softens, refiners often cut output or lean on inventories rather than buy more crude at market prices.

The larger backdrop is that China has been building oil stocks for years, both through government reserves and commercial inventory accumulation. The EIA said China added an average of 1.1 million barrels per day to strategic inventories in 2025, and preliminary data indicated continued inventory building in 2026 before recent market changes. That makes any increase in withdrawals notable, because it signals a possible transition from stockpiling to using reserves as a buffer.

What happens next will depend on how long weak fuel demand lasts and whether refiners continue to face margin pressure. If inventories are drawn down more aggressively, China could reduce import needs in the short term and add another source of uncertainty to already volatile oil markets.