The amount of oil on tankers in transit has jumped to the highest since 2016, and this is cause for concern because it means there is too much oil around and it is not being consumed. That’s the message that Bloomberg had this week, citing Votexa data. Yet China had a different message: it is building more oil tanks to boost its inventories, a lot more. And that tells a different message.
The Vortexa data that Bloomberg cited said that there were 1.2 billion barrels of crude oil currently at sea, being moved from one place to another. Bloomberg’s Alex Longley noted that this was the highest amount of oil in transit since 2016 and is the result of higher production from key countries. However, oil being at sea does not mean it is being stored at sea because there is no space anywhere else. In fact, the Vortexa data for 1.2 billion barrels does not include oil in floating storage. Yet when floating storage is added to this total above, there is even more crude oil at sea—the most since 2020, per Bloomberg’s Longley.
This picture does not look good for oil bulls. It does not look good for producers, either. This picture suggests that most of the oil at sea is being taken from one place to another, looking for buyers rather than being transported from seller to buyer after a deal has already been made. It suggests, ultimately, that demand for oil is falling way short of supply.
However, in the same piece, Longley notes that “So far, much of the oversupply in crude this year has been absorbed by China, which has been hoarding barrels since the start of 2025.” Per the latest from China itself, it is going to step up the “hoarding,” too.
Chinese state-owned energy majors are building 11 new storage sites for crude oil this year and in 2026, Reuters reported this week, saying the country’s energy industry was taking advantage of current oil price trends and stocking up on the commodity while prices were low. The amount of storage capacity to be added over the two years is about 169 million barrels, and it compares with some 180 to 190 million barrels in capacity added over the four years between 2020 and 2024, the Reuters report also noted.
China, the world’s largest importer of crude oil, has been stockpiling it at a rate of close to 1 million barrels daily since the start of the year. Indeed, stockpiling has driven imports higher even in the absence of enough demand at home, according to analysts tracking the difference between China’s oil imports and refinery runs for a glimpse into demand. These developments raise the question: Why is China doing this when supply is about to become even more abundant and prices, as a result, are even lower?
The answer might have to do with China knowing that there is nothing certain in the world of oil, least of all oil production trends. U.S. shale is being waved around as the main reason for depressed prices alongside OPEC+’s cut unwindings, yet U.S. shale production growth is slowing—as it always does when prices trend down. Then there is OPEC+ and its spare capacity. A few years ago, this spare capacity was noted as a reason to stay calm about supply security because if the availability of crude tightened, OPEC+ would just tap that capacity.
Now, after almost three years of production constraints, the return to growth is reducing this spare capacity—in case of a demand surge, OPEC+ will not be able to respond as robustly as it would have otherwise, Reuters suggested in another report from this week. Indeed, the publications’ energy commentator Ron Bousso wrote, OPEC+ has consistently fallen short of its production hike targets. This could be cause for worry in case of strong demand because it suggests there is not as much spare capacity as previously believed.
Defined as “capacity levels that can be reached within 90 days and sustained for an extended period” by the International Energy Agency, spare capacity was cited as a reason not to get too bullish on crude while OPEC+ cut about 5% of global supply in response to falling prices—even though OPEC+ indicated it had no intention of tapping that capacity.
Now, it’s oil at sea that is being given as a reason for expecting even more supply amid weak demand—even though a lot of this oil at sea may be getting from its point of origin to its point of consumption. Meanwhile, every mention of more sanctions against Russia’s energy industry pushes oil prices higher, suggesting a certain sensitivity to supply security among traders. This in turn means the glut is not as certain as it may seem based on reports. After all, if it was, traders would hardly care about any more sanctions on Russian crude.
By Irina Slav for Oilprice.com
