When you think about how oil prices are determined, the conventional wisdom is supply and demand particularly by OPEC+ producers. How well do they match the supply and demand curves. To make money you often have to think about the nonconventional ideas.

In an article by Clyde Russell of Reuters, the nonconventional idea is what is China doing? In 2025, China is the world’s largest importer of oil, effectively used to powers to provide an effective price floor and ceiling by increasing or decreasing the volume of oil it sent to storage.

China does not release public information on its strategic or commercial stockpiles, but some things are clear. In 2025, China was buying more crude than it needed for domestic consumption and exports of refined products.

In the first 11 months of 2025, the surplus crude was 980,000 barrels per day, given that imports and domestic output combined were 15.8 million b/d, while refinery processing amount to 14.82 million b/d.

There is a solid correlation between the volume of surplus crude and the price of oil, with China adding barrels when prices dip but cutting back when they rise.

This leads to a key question – for 2026, will China continue to buy excess crude when prices drop, effectively providing a floor price?

Analysts believe China ha stored between 1 billion to 1.4 billion barrels of oil, which is the equivalent to 90 days of import cover. At least 700 million barrels are likely commercial inventory, implying a strategic reserve of 500 million barrels.

Will China add another 500 million barrels? What is known is China is building more storage with state oil companies including Sinopec and CNOC adding at least 169 million barrels across 11 sites in 2025 and 2026.

Past history shows China is quite prepared to use inventory as a pricing mechanism and as a buyer of 10 million b/d or 25% of global seaborne total, China is an important factor in oil markets.

Linking to dividend paying stocks, in the developed world because of global warming, governments are trying to do less with fossil fuels, this has meant the largest oil companies have less reserves than in the past. The good news for investors is the price of oil remains higher than exploration means the companies will continue with greater dividends and stock buybacks. Given the world, invariably there will be upwards pressure on oil prices meaning the total return on your investment should mean oil companies are worth holding in your portfolio.

There are more questions than answers, till the next time – to raising questions.