Asian Floating Crude Stocks Expected to Fall as Chinese Buying Picks Up

Oil floating in Asian waters is expected to decline as the new year begins, with exports of sanctioned crude easing and Chinese refiners increasing purchases at steeper discounts. The shift marks a tightening in regional supply-demand balances after months of heavy sanctioned exports pushed floating storage to a three-year high, leaving large volumes stranded offshore.

According to data from Kpler, floating crude inventories in Asia climbed to 70.9 million barrels as of December 18, up from just 21 million barrels in early September. More than half of that total came from Iran, following a surge in exports by sanctioned producers, primarily Iran and Russia, through the fall. That export wave is now losing momentum, reducing the number of unsold cargoes remaining at sea.

As the graph above shows, floating crude storage built steadily over the course of the year before accelerating sharply in the final months, reaching the highest levels seen in three years. The increase was driven primarily by Iranian barrels, which make up the largest portion of offshore inventories, reflecting a surge in sanctioned exports that outpaced immediate buying interest.

Iranian shipments have already retreated from highs above 1.9 million barrels per day in September and October to around 1.1 million barrels per day so far in December. Venezuelan exports have also declined following a U.S. tanker seizure earlier this month, while Russian crude flows have softened amid Ukrainian attacks and disruptions related to sanctions, despite some recent rebounds linked to refinery outages.

On the demand side, China's independent refiners, known as "teapots," have stepped up their buying as discounts have widened. Fresh import quotas issued in late November allowed refiners to draw barrels out of bonded storage, accelerating discharges from floating storage. More 2026 import quotas are expected before year-end, further supporting intake, particularly of Russian ESPO crude.

Kpler data shows that crude imports into Shandong province have risen to 3.8 million barrels per day so far in December, up from 3.5 million in November and 3.1 million in October. At the same time, discounts on Russian ESPO crude have widened to more than $7 per barrel below ICE Brent, while Iranian light crude is trading near an $8 discount.

Analysts expect floating storage to continue easing as refiner margins improve and new quotas are issued, though a brief build remains possible if additional Russian volumes arrive ahead of quota decisions. "In the new year, I expect storage to start drawing down with greater independent refiner intake," said Naveen Das.