APPEC: China could lower crude oil stockholding requirement as supplies tighten: sources

China could relax restrictions on drawing crude from "social responsibility stocks" in response to the recent surge in oil prices driven by concerns about tightening supplies due to the war in the Middle East, according to three sources familiar with the matter who spoke to Platts on the sidelines of APPEC 2026 held in Singapore over Sept. 7-10.

The potential move to relax restrictions could come as Iranian crude supplies have almost disappeared from the market, prompting Chinese refiners to buy more non-sanctioned crude and driving prices higher, an official with a state-run refiner said.

A second source with another state-run refiner said, "State-run refineries need more feedstock to sustain the country's crude runs, making up for the reduction in the independent sector due to the low availability of cheaper sanctioned crude."

The sources, speaking on condition of anonymity due to the sensitive nature of government policies and commercial considerations, declined to disclose details regarding China's "social responsibility stock" requirements.

In March, Beijing tightened restrictions on state-run refineries withdrawing crude from "social responsibility stocks," aiming to encourage operational optimization and secure maximum feedstock amid uncertainty caused by the war in the Middle East.

According to petroleum reserve guidelines released in January 2015 and reviewed by Platts, all refineries in China were required to maintain crude oil inventories equivalent to at least 15 days of their designed daily processing capacity. When international oil prices exceed $130/barrel, the inventory requirement could be lowered to a minimum of 10 days of designed daily processing capacity.

The stockholding requirement had been raised to an undisclosed level but was recently lowered following the outbreak of the Middle East conflict, according to the three sources.

On Aug. 24, Sinopec said it was maintaining crude stocks sufficient to cover about 20 days of its throughput and oil product stocks adequate for 15 days of sales.

Sinopec's listed refinery, Shanghai Petrochemical, said it would continue to manage crude inventories on a balanced inflow-and-outflow basis, avoiding inventory drawdowns.

Inventories decline

China's crude inventories fell to 1.295 billion barrels for the week of Sept. 10 from a record high of about 1.382 billion barrels in end-May, according to Ursa Space, which monitors global crude oil storage levels and inventories using satellite-based synthetic aperture radar imagery.

The second source said commercial crude stocks, especially those at ports in Shandong province that are privately owned and can be freely drawn down, were the primary contributors to the reduction in China's total crude inventories.

State-run refiners faced tighter restrictions on drawing down commercial crude stocks, as they were required to declare the volume borrowed and replenish an equivalent amount within the same month.

"As Middle Eastern crude availability has tightened in the market, we have sometimes had to replenish borrowed Middle Eastern barrels with crude grades from other regions," said a third source with a separate state-run refiner.

Platts, part of S&P Global Energy, assessed the spread between cash Dubai and the same-month Dubai swap at an average of $10.16/b through Sept. 10 in 2026, compared with an average of $1.998/b in 2025. The spread -- widely known as the Dubai Mo1-Mo3 market structure -- reached a record high of $65.69/b on March 19 and remained at a steep backwardation structure of $29.09/b on Sept. 10.

A backwardation in the crude market structure indicates lower prices for forward-month contracts compared with the current spot price. Essentially, backwardation occurs when market participants anticipate future prices to be weaker than prompt prices, thereby reducing the incentive to store oil for later use.

The Platts Dubai market structure is a key component of the monthly official selling price calculations used by Middle Eastern producers.