A nascent recovery in Chinese oil demand has begun to falter as continued fighting in the Middle East and limited Iranian supply keep crude prices too high for private refiners. Energy Aspects and FGE Nexant ECA have both cut estimates for the world’s top oil buyer, dialing back earlier expectations of a modest recovery toward the end of 2026. FGE trimmed its fourth-quarter import forecast to 9.3 million barrels a day from a previous 9.9 million, while Energy Aspects cut its estimate by 440,000 barrels to 9.2 million barrels per day.

China imported an average of 11.6 million barrels a day last year as it built up strategic stockpiles, supporting global oil prices at a time of ample supply. That figure has been just below 10 million barrels a day on average since, as the country pulled back, but had been expected to tick higher later in 2026. “We don’t expect significant upside to China’s crude imports, partly as hefty premiums and expensive freight drive up the cost of feedstock, eroding margins,” said Samuel Kong, senior oil analyst at FGE Nexant ECA. China, always a heavyweight buyer, has become an even more important bellwether in the oil market over the past year.

Its absence in the first months of the war helped limit global price rises, while evidence of buying in recent weeks caused premiums for some grades to skyrocket to more than $20 a barrel over benchmark prices. A lasting recovery, however, appears to be some way off, as private refiners find themselves squeezed by the absence of discounted sanctioned crude. Flows from Iran alone reached more than 1 million barrels a day before the war. “In theory, this should be the moment for China to re-enter the international market as a major buyer, but it is in no rush to do so,” said Liao Na, founder of GL Consulting.

Buyers are likely to pull back with oil above $100 a barrel and step up purchases if prices retreat into the $80s, she added. Flows of crude from Persian Gulf producers through the Strait of Hormuz have recovered in recent months, with analysts at JPMorgan Chase & Co. estimating crude shipments at 98% of pre-war levels. But prices for standard Saudi or Abu Dhabi cargoes are high, given the risks of transiting the chokepoint, and a US blockade continues to curb Iranian supplies. “State refiners have to make up for lost teapot runs due to Iranian barrels drying up,” said Kong.

These processors, however, need to weigh the economic benefits of operating at higher levels — and that decision comes down to their ability to export fuel in order to secure strong margins, he added. China can always stay out of global markets by tapping its inventories instead — the hoard currently stands at about 1.2 million barrels, according to Energy Aspects. But Beijing has taken a conservative approach to this stockpile, making it unlikely the government would dip significantly into the resource without a normalization of Middle East flows on the horizon.

A more-modest-than-expected import recovery in the last months of the year has implications for other Asian consumers, particularly in fuel markets, at a time when diesel and other supplies are tight. China could allow more exports — in line with US President Donald Trump’s request and refiners’ desire to make the most of high margins — though only if enough barrels are imported in the first place. Traders will be watching fuel consumption around the coming Golden Week holidays for signs of whether demand remains weak enough for Beijing to support more enthusiastic exports.