China's refineries processed the most oil in a year in March, but the volume of crude being added to inventories still rose to the highest in nearly three years as imports surged.
China's surplus crude amounted to 1.74 million barrels per day (bpd) in March, the most since June 2023, according to calculations based on official data.
The swing to a huge surplus of available crude in March came after refiners made a rare draw on stockpiles in the first two months of the year, when oil imports were weak amid the higher prices that prevailed when cargoes were arranged.
China does not disclose the volumes of crude flowing into or out of strategic and commercial stockpiles, but an estimate can be made by deducting the amount of oil processed from the total of crude available from imports and domestic output.
Refiners processed 14.85 million bpd in March, according to official data released on April 16, up 0.4% from the same month in 2024.
Crude imports were 12.11 million bpd in March, up 5% from the same month a year earlier and the highest since August 2023.
Domestic production was also strong, rising 3.5% to 4.48 million bpd in March, which was the most since at least the middle of 2011, according to Reuters' records.
Putting imports together with domestic output gives a total of 16.59 million bpd available to refiners, leaving a surplus of 1.74 million bpd after the processing volume is deducted.
For the first two months of 2025, China's refiners actually processed about 30,000 bpd more than what was available from crude imports and domestic production, the first time in 18 months that they had drawn on inventories.
But the massive surplus in March means that for the first quarter there was 580,000 bpd more crude available than what was processed.
Overall, the story for the world's biggest crude importer is that the weakness of the first two months for both imports and refinery processing was reversed in March.
The question is whether the strong performance in March is a sign of improving demand in the world's second-biggest economy, or was it driven more by temporary factors.
IRAN IMPORTS
The rebound in crude oil imports was largely driven by a surge in arrivals from Iran and Russia.
Imports from Iran were estimated by commodity analysts Kpler at 1.71 million bpd in March, up 20% from February's 1.43 million bpd and a five-month high.
The surge in imports from Iran was largely driven by expectations that the United States is planning to introduce new measures that target vessels that carry Iranian oil, leading China's refiners to stock up before any new sanctions were introduced.
Imports from Russia also recovered as refiners switched to using non-sanctioned tankers to deliver cargoes, skirting around sanctions imposed by former U.S. President Joe Biden just before he handed over to Donald Trump in January.
March's crude oil imports also came as global prices were easing, with benchmark Brent futures going from a peak so far in 2025 of $82.63 a barrel on Jan. 15 to under $70 by early March.
China's refiners tend to buy more crude as prices drop and pare back imports when they rise, as they did in the first two months of the year.
Crude prices have declined further since March, dropping to a five-year low of $61.34 a barrel on April 8 as fears over the global economy mounted amid Trump's escalating trade war.
This may support import volumes in coming months, but much will depend on how quickly the massive tariffs Trump has imposed on imports from China translate into lower fuel demand as manufacturing and shipping volumes decline.
The March refinery processing rate was likely lifted by higher run rates at smaller, independent plants and by the start up of a new unit of Shandong Yulong Petrochemical.
Similar to import volumes, whether refinery runs can continue to stay elevated will depend on whether the Chinese economy can navigate the tariff storm.