The New Oil Bull Markets Will Be Dependent on China Confirming Oil Purchases and Global SPR Rebuilding

A recent analysis from OilPrice.com highlights this transition. The biggest threat is no longer just lost production but the mandatory replenishment of strategic and commercial oil stocks by governments, refiners, and traders. Emergency SPR releases and exchange agreements have stabilized markets in the short term but created future obligations, adding an estimated 500,000–750,000 barrels per day (bpd) of structural crude demand through at least 2028.

China remains central to whether this bull market materializes. The world’s largest oil importer has ramped up domestic production significantly in recent years as part of its energy security push. Crude output reached record levels in 2025 (around 4.32 million bpd by year-end), driven by aggressive drilling in aging fields, an offshore boom (especially Bohai), and rapid shale oil growth—from just 4.54 million barrels annually in 2018 to over 60 million barrels in 2025.

PetroChina forecasts a modest further increase in 2026 (around 217 million tonnes, or roughly +0.5% year-on-year). Government directives since 2019 have prioritized maximizing domestic output to reduce import dependence (which still hovers above 70% in many estimates). Early 2026 data showed crude production shifting from decline to growth.

However, this domestic surge has not eliminated China’s massive import needs. During the Iran-Hormuz disruptions, Chinese crude imports plunged to eight-year lows—around 7.8 million bpd in May 2026 or even lower per some trackers (down sharply from pre-crisis averages near 11+ million bpd).

China drew heavily on its vast stockpiles (estimated at over 1 billion barrels built up pre-crisis, aided by discounted Russian and Iranian barrels) and cut refinery runs.

The OilPrice analysis notes that China’s weak refinery activity and subdued demand softened global consumption during the initial phase of the conflict. Recovery in Chinese refinery runs and economic activity would unleash additional import demand that coincides perfectly with OECD strategic reserve rebuilding.

The bull market hinges on China confirming renewed large-scale oil purchases. As stockpiles deplete and domestic demand stabilizes or rebounds, Beijing’s buying will be the critical swing factor amplifying the structural demand from global SPR replenishment.Iraq and UAE:

Iraq is accelerating alternative export routes. Work has begun on the major Basra–Haditha crude pipeline (approximately 435 miles / 700 km, targeting significant capacity), with $1.5 billion allocated in 2026. This links southern fields northward to connect with routes toward Turkey’s Ceyhan terminal (via Fishkhabour) or potentially Syria/Jordan.

Iraq is also revamping the direct Kirkuk–Ceyhan pipeline segment to bypass Kurdish-controlled routes and boost northern exports substantially (aiming toward 650,000+ bpd total via Turkey routes). These efforts aim to provide resilience amid ongoing Hormuz uncertainties.

The UAE has already demonstrated agility. It achieved record crude oil production of 4.1 million bpd in June 2026 (per IEA data), up significantly from 2025 averages, while leveraging its existing Habshan–Fujairah pipeline (ADCOP, ~1.5–1.8 million bpd capacity) that bypasses the Strait.

Abu Dhabi is fast-tracking a new West-East pipeline to Fujairah, expected to become operational in 2027 and roughly double export capacity through that terminal. UAE exports rebounded strongly (reaching ~85% of pre-war levels by early June) using alternative routes, storage, and its own tanker fleet.

These infrastructure moves by Iraq and the UAE help stabilize supply flows and reduce vulnerability to Hormuz disruptions. However, they also underscore that risks persist—full pre-crisis tanker traffic through the Strait has not returned, even amid ceasefires and talks.

Tanker traffic through the Strait of Hormuz dropped dramatically during the 2026 crisis (effective near-closure periods in March onward, with attacks, insurance withdrawals, and blockades). Pre-war daily crossings often exceeded 125–140 vessels, supporting ~20 million bpd of exports.

Even with partial recovery and diplomatic progress, traffic remains well below pre-war norms. Many vessels are loitering, rerouting, or avoiding the area due to elevated war-risk premiums, security concerns, and lingering threats. Shipowners and insurers are reassessing risks, meaning fewer tankers are readily returning into the Gulf to load and “refill” export flows.

This logistics friction keeps physical markets tighter than headline supply numbers suggest, complementing the inventory rebuild narrative.