2026 geopolitical shocks are changing how China trades oil and gas

The shift is also speeding up plans already set out in the 15th Five-Year Plan, such as buying from more places, exporting more flexibly and managing stockpiles more actively.

Crude oil: buying from more places at once

Crude shipments into China slowed sharply in the second half of 2026, staying well below normal levels. But China is not simply swapping one main supplier for another. When Saudi Arabia's share of Gulf supply dropped, Iraq, the UAE and other Gulf producers picked up some of the difference, so total Gulf volumes still went up. At the same time, refiners are buying more from West Africa, Canada and South America. This buying has been so concentrated that prices for these replacement barrels have jumped well above their usual level. Much of this activity is about rebuilding low stockpiles and taking advantage of strong export profits, more than a sign that domestic demand is picking up. In fact, fuel demand keeps falling as electric trucks and cars replace more petrol and diesel use.

Fuel exports: a useful outlet, but limited by quotas

As China's domestic fuel demand weakens, exporting fuel abroad, where profit margins are stronger has become an important release valve for refiners. Exports roughly doubled in July, and stayed high in August. But this depends on government export quotas, which are unlikely to be larger than in 2025. How generous future quotas are will say a lot about how confident policymakers are in the state of domestic demand. With tighter quotas would suggest more confidence, while looser ones suggest more caution.

Natural gas: pipelines hold steady, LNG flexes with the market

Gas demand growth slowed sharply in 2026, partly because high prices pushed some factories and power plants to cut back or switch fuels. Pipeline gas from Russia and Central Asia, mostly bought under long-term contracts kept growing steadily and is proving to be a dependable base supply. Ship-borne LNG, on the other hand, is doing more of the adjusting. When prices abroad rose above what buyers at home could pay, China began reselling some of its LNG cargoes to Japan, South Korea and Southeast Asia instead. This is a new role for China of not just a buyer of gas, but a kind of regional middleman, which buying when prices are low and reselling when prices are high.

What to watch next

A lot depends on how tensions around the Strait of Hormuz play out. If shipping through the Strait returns to normal in 2027, LNG imports could grow again, though most of that growth is likely to come from contracts already in place, not fresh buying. If tensions instead continue, China is likely to lean harder on domestic gas, including harder-to-extract sources such as shale gas, and expand its pipeline network further. Either way, the price gap between replacement crude and normal crude may not last. It largely reflects today's supply disruptions and a rush of buyers chasing the same barrels, not a lasting shift in how oil is priced.

China's oil and gas trade is becoming less about finding the cheapest deal and more about managing risk. Crude buyers are spreading purchases across more countries instead of depending on one substitute source, fuel exports are acting as a pressure valve for weak domestic demand, and gas trade is splitting into a stable pipeline base with a more flexible and opportunistic role for LNG. The direction of tension around the Strait of Hormuz remains the biggest swing factor shaping how this plays out over the next few years.

The above content is the major conclusions and highlights extracted from the "2026 Geopolitical Shocks Reshape Oil & Gas Trade: From Lowest-Cost Sourcing to Systemic Risk Management" chapter of the latest China Policy Perspective (produced by GL Consulting).

The full chapter includes detailed policy comparison tables, an impact assessment across 16 market segments, and strategic recommendations for investment, trading and partnerships.

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