In October, China’s crude oil processing hit almost 15 million barrels per day. This is a 6.5% rise compared to last year, according to the National Bureau of Statistics. Over the first ten months, Chinese refineries processed 4% more crude oil than in the same period last year, suggesting a yearly increase. The stockpiling reached 690,000 barrels per day in October. This number is slightly higher than September but lower than earlier this year. The reason behind this buying raises questions about how long it will continue and how it will affect the oil market’s surplus.

Market Observations

The FXStreet Insights Team shares market observations that include insights from both internal and external analysts. This information comes from reliable experts. In October, China’s crude oil processing remained strong at nearly 15 million barrels per day. Although this is a slight decline from September, it shows a notable 6.5% increase compared to the same time in 2023. This trend indicates a solid yearly demand forecast for 2024. These numbers show that China is refining more oil while also building its strategic reserves, adding around 690,000 barrels per day to its stockpiles in October. This purchase strategy has helped the oil market manage global oversupply this year, providing support for crude prices that might have otherwise dropped. Additionally, recent data from the U.S. Energy Information Administration revealed an unexpected drop in American crude inventories last week, with stocks decreasing by 2.1 million barrels. The tighter U.S. market, combined with China’s demand, is currently supporting oil prices. Consequently, WTI crude futures for December delivery remain stable above $85 per barrel.

Supportive Outlook

China’s overall economic outlook also appears positive, with industrial production for October increasing by 4.8%, exceeding analysts’ expectations. This suggests that the demand for refined products like diesel and gasoline is driven by real economic activity, not just stockpiling. Compared to the volatility of 2023, this period seems more stable, although it still relies heavily on this particular demand source. The key question remains: How long will China keep buying oil beyond its immediate needs? These inventory builds are helping reduce market excess supply, but this strategy won’t last indefinitely. A signal that China is slowing down its stockpile purchases could quickly change market sentiment and expose the underlying oversupply. For traders, this creates a challenging situation in the upcoming weeks as we approach the new year. Short-term call options on Brent and WTI seem wise due to strong immediate demand signals. However, it’s also prudent to consider buying puts for contracts expiring in the first quarter of 2025, in case China’s pace of stockpiling suddenly slows. Create your live VT Markets account and start trading now.

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