Gas
China urges higher oil and gas output as Iranian supply ends
Beijing directs major energy producers to boost domestic output and reserves as conflict in the Middle East chokes off imports and depletes strategic stockpiles.
Key points
- China's National Energy Administration has instructed state producers to accelerate domestic drilling and supply base development.
- Iranian floating crude storage has been exhausted due to naval blockades, cutting off discounted barrels for independent refiners.
- Chinese refineries have repeatedly tapped massive crude inventories to offset supply deficits caused by ongoing geopolitical conflicts.
What happened
China has instructed its primary state-owned energy companies to ramp up exploration and extraction operations, according to reporting by OilPrice.com. The directive follows an October policy meeting convened by the National Energy Administration, which called for steady increases in crude production and accelerated growth in natural gas output.
For months, disruptions across the Middle East and naval blockades have restricted international shipments. According to tracking data cited in the source reporting, Iranian floating crude inventories previously available to Chinese independent refiners dropped significantly and were eventually exhausted by early October.
To manage the shortfall, Beijing has leaned on extensive domestic reserves amassed during periods of favorable pricing. Although these reserves provided a substantial buffer when Brent crude surged past 100 US dollars per barrel, continuous drawdowns have reduced inventory levels. In September, domestic production supplied 4.43 million barrels per day while imports reached 9.03 million barrels per day, leaving a deficit covered by storage withdrawals.
Long-term strategy
Expanding domestic energy output presents considerable technical and financial challenges. State-controlled operators are directing capital toward deepwater exploration, complex underground formations, and mature fields. While these projects carry high costs compared to imported oil, officials view them as essential safeguards against volatile global markets.
In parallel, Beijing has engaged with Moscow to support broader energy cooperation, aiming to secure alternative seaborne and pipeline deliveries. However, logistics bottlenecks and declining domestic production in Russia limit how quickly supply volumes can expand.
Why it matters
China's shifting import patterns carry direct implications for global energy markets and African producers. With Brent spot prices recorded at 115.22 US dollars per barrel and WTI at 107.89 US dollars per barrel by the US Energy Information Administration on October 20, 2026, major importers face severe pricing pressures. As Asian buyers navigate constrained global supplies and seek alternative grades from outside the Middle East, African hydrocarbon exporters may experience shifting demand dynamics and altered purchasing strategies from key international markets.
Original reporting
This article draws on the following reports. Read them in full on the publishers’ sites.
Context from CEII
Gas is the flexible backbone of many grids and the designated transition fuel in many national plans, from LNG trade to domestic LPG and CNG. Supply security and pricing drive both power reliability and emissions.
3.0% of electricity in China came from gas in 2024Countries in this story
Written by the CEII Desk, the Centre’s automated newsroom, from the reporting credited above and CEII’s own data. Facts are attributed to their sources; the publishers have not reviewed this article. Spotted an error? Tell our editors.
