If there is a surprise in China's response to the Iran conflict, it is not that the world's largest crude oil importer is cutting its imports and refining operations, but rather the extent of this reduction. China has a track record of reducing crude oil imports in response to rising prices, and increasing imports when they fall.

But the collapse of imports to their lowest level in about 10 years in June was dramatic, especially considering that although crude oil prices rose in the weeks following the US-Israeli attack on Iran on February 28, they did not reach the levels seen in 2022 when the Russia-Ukraine war began.

China's crude oil imports in June were 7.12 million barrels per day, the lowest since October 2016, down 41.3% from the same month last year, according to official data. Under normal circumstances, a decline of this magnitude would have led to a significant drawdown of China's inventories, but that did not happen.

On the contrary, Chinese refineries reduced refining rates to 12.47 million barrels per day in June, down 17.7% from the same month in 2025, the lowest since March 2020 during the COVID-19 pandemic.

China does not disclose the amounts of crude oil entering or leaving its strategic and commercial inventories, but they can be estimated by subtracting the amount of refined oil from the total available crude oil from imports and domestic production.

Based on that, crude oil imports were 7.12 million barrels per day, while domestic production was 4.41 million barrels per day, meaning refineries had total available inventory of 11.53 million barrels per day. Refineries processed 12.27 million barrels per day, meaning about 940,000 barrels per day were drawn from inventories, up from about 500,000 barrels per day in May.

Although China has drawn from inventories over the past two months, it has boosted its reserves for the first half of the year as a whole, with a crude oil surplus of about 530,000 barrels per day.

Part of China's ability to sharply reduce refining operations in June is due to Beijing's imposition of informal restrictions on refined product exports, a move seen as a way to ensure adequate fuel supplies for the domestic market during the Iran conflict.

China exported 393,000 barrels per day of light and medium oil products in June, according to data compiled by commodity analytics firm Kepler, down slightly from about 400,000 barrels per day in May, but above the 54-month low of 338,000 barrels per day in April.

There is no doubt that China has played an important role in adjusting crude oil demand during the current Iran crisis, which has seen the loss of about 10 million barrels per day of crude oil and refined product supplies due to the effective closure of the Strait of Hormuz. But China has also contributed to the supply shortage in oil product markets by reducing its exports since April. The question for the market is: what is China likely to do in response to the current crisis?

Prices are a key factor

If the answer is viewed from a price perspective, China may surprise the market again. China's crude oil imports are likely to rebound in August and September, as refineries may have purchased cargoes that managed to leave the Strait of Hormuz during the brief cease-fire period between the United States and Iran.

That period, which lasted about three weeks starting in mid-June, saw a sharp decline in crude oil prices, as the market expected a return to normal supply levels from the Middle East, and thus a potential supply surplus.

Brent crude futures fell to a low of $70.14 per barrel on July 2, after reaching a high of $126.41 at the end of April. However, renewed hostilities pushed Brent back up to $90.80 per barrel in early Asian trade on Monday.

The recovery in crude oil prices is likely to lead Chinese refineries to reduce their imports, meaning a decline in incoming volumes starting from October onwards, given the time lag between ordering cargoes and delivery. The fate of China's refined product exports remains unclear.

Beijing may now be confident in its ability to continue relying on its huge crude oil inventories, which are estimated at at least 1.2 billion barrels.

China may also be inclined to increase refining rates and boost oil product exports to allow refineries to benefit from high profit margins in Asia.

The price of gas oil, the main component of diesel, reached $143.03 per barrel on July 17, an increase of $54.93 over the Brent crude closing price, nearly three times the increase of $18.94 recorded on February 27, the day before the US-Israeli attack on Iran.

Some preliminary indications suggest that Beijing may have eased its informal restrictions on oil product exports, with Kepler tracking shipments of 787,000 barrels per day of light and medium products for July.

An economic columnist for Reuters and energy affairs specialist.