China Oil Demand Set to Rebound in August 2026

China's crude imports hit an eight-year low in May, but JPMorgan sees Beijing returning as a major oil buyer in August, with PetroChina named its top pick in the global energy market recovery.

Lead

China's crude oil imports plunged to an eight-year low in May 2026, hitting 7.8 million barrels per day (mbd) as conflict in the Persian Gulf severed established supply routes and forced Beijing to draw down its strategic petroleum reserves for the first time in more than a year. JPMorgan analysts, in research published Wednesday, forecast that China will resume large-scale crude purchasing from August, driven by a chemical-sector demand rebound and an accelerated reserve replenishment cycle — developments the bank expects to materially tighten the global energy market in the second half of the year.

What Happened

The collapse in Chinese crude imports marks a sharp reversal from the opening months of 2026, when China was importing close to 12 mbd on a seaborne basis — approximately 16% above year-earlier levels — as state buyers aggressively stockpiled discounted barrels ahead of anticipated supply tightness. That inventory-building cycle ended abruptly when escalating hostilities in the Middle East effectively curtailed access to Persian Gulf supply, which had historically accounted for roughly 40–45% of China's crude mix.

Vessel-tracking data suggest imports remained near 8 mbd in June, implying an ongoing domestic inventory drawdown of roughly 3 mbd. In March, Beijing ordered a ban on refined fuel exports to prioritize domestic supply — an emergency measure that underscored the severity of the supply pressure confronting the country.

JPMorgan Oil Picks and the August Thesis

JPMorgan estimates that approximately 3 mbd of China's demand shortfall is temporary. The bank identifies two primary recovery catalysts: a rebound in chemical-sector feedstock demand — idled during the period of constrained supply and compressed petrochemical margins — and an accelerated restocking cycle in China's strategic petroleum reserve, which holds an estimated 1.3 billion barrels in combined commercial and strategic capacity, now partially drawn.

The August timeline is consistent with typical cargo-scheduling lead times and aligns with seasonal patterns in which Chinese buyers increase crude nominations ahead of the fourth-quarter refining ramp-up.

Among JPMorgan oil picks, the bank names PetroChina as its highest-conviction play on a China demand recovery, citing the state giant's integrated upstream exposure and dominance in domestic refining throughput. South Korean petrochemical producer LG Chem, with deep feedstock links to Chinese industrial demand, is also named as a beneficiary as chemical-sector buying normalizes.

Crude Oil Price Forecast and Global Energy Market Backdrop

The crude oil price forecast in 2026 reflects the scale of geopolitical disruption caused by the Strait of Hormuz closure, which has effectively removed more than 10 mbd from global supply since late February. The U.S. Energy Information Administration projects Brent crude averaging approximately $105–106 per barrel through June and July, before retreating toward $89 per barrel in the fourth quarter as alternative supply routes and diplomatic channels partially ease the bottleneck.

Global oil demand is forecast at roughly 104 mbd for full-year 2026 — down 1.1 mbd from 2025 — representing a rare year-on-year contraction driven by industrial demand destruction in import-dependent economies and constrained refining throughput. The IEA projects a sharper recovery of approximately 2.5 mbd in 2027, contingent on supply flows normalizing.

Against that backdrop, China's anticipated re-emergence as a major buyer in August carries outsized significance. A return to 11–12 mbd of Chinese crude imports would absorb a substantial share of the surplus barrels accumulating in Atlantic Basin and West African markets during the Hormuz disruption — materially altering the supply-demand calculus that has kept forward curves in deep contango since the conflict intensified.

Geopolitical Dimension

Beijing's eventual return to full-scale purchasing will reflect not only refinery demand, but also a state-directed decision on the optimal price level and supply configuration for renewed reserve accumulation. That calculation is sensitive to the trajectory of Middle East diplomacy and the accessibility of discounted non-Gulf crude supplies.

What Comes Next

The pace of China's import recovery hinges on three variables: the trajectory of Persian Gulf shipping access; domestic refinery utilization rates, which fell in May as crude drawdowns replaced seaborne supply; and Beijing's willingness to pay Atlantic Basin price premiums for non-Gulf barrels as substitution for disrupted Middle Eastern grades.

Chemical demand is expected to lead the cyclical rebound. Petrochemical margins showed early signs of stabilization in June, suggesting the feedstock purchasing pipeline that underpins LG Chem and its peers may begin to normalize ahead of the formal August restart in crude buying.

Outlook

China's oil demand trajectory is the central variable in the global energy market for the second half of 2026. A confirmed return to full-scale buying in August would materially tighten global balances against an already supply-constrained backdrop, providing support for Brent crude prices above current forward-curve levels. The crude oil price forecast consensus points to a moderating but elevated environment into year-end, with the balance of risk tilted to the upside should Chinese restocking volumes exceed expectations or Persian Gulf disruptions persist beyond current assumptions. JPMorgan's positioning in PetroChina and chemical-sector beneficiaries reflects a conviction that the current demand trough is a temporary artifact of supply disruption rather than a structural shift in China's energy appetite.