China’s Crude Imports Collapse as Gulf Disruption Meets Weak Domestic Demand

China imported 29.27 million tonnes of crude oil in June, equivalent to approximately 7.12 million barrels per day. That represented a 41.3% decline from a year earlier and a further 12% decrease from May, when purchases had already fallen to an eight-year low. June’s volume was the weakest since October 2016, marking an extraordinary retreat for the world’s largest crude importer. The speed of the decline suggests that the figures cannot be explained by a normal refinery-maintenance cycle alone.

The most immediate constraint has been the conflict involving Iran and the resulting disruption to shipping through the Strait of Hormuz. The Middle East normally supplies roughly half of China’s crude imports, leaving Chinese refiners especially exposed to interruptions along the Gulf export route. Ship-tracking data indicated that China’s seaborne crude receipts fell to around 6 million barrels per day in June, while Middle Eastern arrivals reached their lowest level in approximately ten years. Imports of Iranian crude reportedly dropped about 40% from May to below 800,000 barrels per day. The breakdown of the latest US-Iran truce has therefore reduced the likelihood of a rapid normalization in cargo flows.

Domestic conditions have reinforced the supply-side shock. China’s refineries processed 51.24 million tonnes of crude in June, down 17.7% year on year and the lowest monthly volume since March 2020. Average utilization of crude-distillation capacity fell to 57.72%, declining by 3.28 percentage points from May and more than 13 percentage points from a year earlier. Weak demand for gasoline and diesel, high fuel prices and the growing use of electric vehicles have reduced the incentive to maintain high operating rates. Restrictions introduced in March to conserve refined products for the domestic market have also limited export opportunities: China exported 23.59 million tonnes of refined products in the first half, 13.2% less than a year earlier.

The wider energy data show that this was primarily an oil-market shock rather than a uniform collapse in Chinese energy demand. Natural-gas imports rose 3.7% year on year to 10.93 million tonnes in June, while coal imports jumped 30% to 42.78 million tonnes after stricter mine-safety inspections constrained domestic supply. China has therefore been adjusting its energy purchases according to availability, inventories and relative costs. The combination of higher coal and gas purchases with sharply lower crude imports also illustrates the practical limits of replacing one energy source with another, particularly because oil remains essential to aviation, freight, petrochemicals and other industrial activities.

For global markets, reduced Chinese buying has released more crude for other consumers and moderated the upward pressure created by Gulf supply disruptions. At the same time, China’s restrictions on refined-product exports can tighten regional supplies of gasoline, diesel and other fuels, supporting Asian refining margins even as Chinese refineries operate below capacity. The critical question is whether June represents a temporary trough or the beginning of a more durable decline in Chinese oil dependence. A ceasefire, reopening of Gulf shipping routes or easing of product-export controls could revive refinery activity, while depleted commercial or strategic inventories may eventually require replenishment. However, the expanding electric-vehicle fleet and weakening transport-fuel demand suggest that not all of the lost imports will necessarily return, even after geopolitical conditions improve.