China's crude oil stockpiles continue to grow as the nation refines less than its combined imports and domestic production, maintaining its position as the world's largest oil importer. In May, the surplus reached 1.4 million barrels per day (bpd), marking the third consecutive month above 1 million bpd, based on official data calculations.

An oil tanker unloads crude oil at a crude oil terminal in Zhoushan, Zhejiang province, China July 4, 2018.

This surplus enables China to reduce import volumes in the coming months amid rising oil prices, driven by tensions in the Middle East. Brent futures increased nearly 6% since June 12, reaching approximately $73.58 per barrel in Asia on Tuesday, following Israeli airstrikes on Iran starting June 13, which prompted retaliatory drone and missile attacks from Tehran. Iran's oil production and export facilities remain unaffected, but heightened risks have contributed to the price surge.

Historically, Chinese refineries have responded to rapid price increases by cutting imports and drawing on stored oil. Due to a delivery lag of up to two months, any reduction in imports is expected to become evident from August onward. With ample stockpiles, China has significant flexibility to lower imports, potentially easing upward pressure on global oil prices.

Official data indicates that refiners processed 13.92 million bpd in May, down from 14.12 million bpd in April and 1.8% lower than the previous year. May imports totaled 10.97 million bpd, a decrease from 11.69 million bpd in April, while domestic production slightly rose to 4.35 million bpd from 4.31 million bpd. Together, imports and domestic output provided 15.32 million bpd, resulting in the 1.4 million bpd surplus after accounting for refinery throughput.