The two most systemically important holders of strategic oil stocks, the United States and China, are now moving in opposite directions. The US has drawn down its Strategic Petroleum Reserve transparently, publishing inventory data and explicitly linking releases to inflation management and near-term price dynamics. China, by contrast, has continued to accumulate strategic and quasi-strategic oil stocks under a framework that remains largely undisclosed.
This divergence is not ideological. It reflects different approaches to allocating risk across physical supply, financial infrastructure, and market signalling.
The US SPR: transparency with measurable exposure
The US Strategic Petroleum Reserve was established after the oil shocks of the 1970s as a structural hedge against supply disruptions. Its effectiveness rested on predictable governance, rarity of use, and full disclosure.
In recent years, SPR releases have increasingly been used as a tactical policy instrument to influence short-term prices and inflation expectations. A long-cycle insurance asset is now being deployed as a short-cycle stabilisation mechanism.
From a risk perspective, transparency reduces informational uncertainty for markets but increases strategic exposure. Regular disclosure improves price discovery, while simultaneously revealing the system’s remaining shock-absorption capacity. As inventories decline, resilience becomes observable, quantifiable, and therefore constrained.
The US framework minimises uncertainty for market participants by accepting full visibility of its strategic position.
China’s SPR: resilience inferred rather than disclosed
China’s strategic petroleum reserve follows a different risk logic, but one that must be understood largely through inference rather than direct reporting.
China does not publish regular data on strategic stock levels, stock flows, or drawdown criteria. As a result, assessments of its reserve system rely on policy design, institutional structure, and observable market behaviour rather than disclosed inventories.
China’s reserve architecture is widely understood to combine government-owned strategic stocks with inventories held by state-owned and commercial entities under regulatory mandate. While volumes are not reported, this integrated structure is evident from energy planning documents and the dual commercial and strategic role assigned to major state-owned oil companies.
Accumulation behaviour is similarly inferred. Periods of pronounced price weakness have repeatedly coincided with crude import volumes exceeding estimated consumption and refinery throughput, alongside rising utilisation of onshore storage. While the precise allocation between commercial and strategic stocks cannot be observed, the residual behaviour is consistent with stockpiling.
The absence of disclosure does not remove risk. It reallocates it. Market participants face uncertainty regarding the size, availability, and deployability of strategic stocks, while the state preserves optionality over timing and scale of intervention.
Dollar pricing and financial infrastructure risk
This asymmetry cannot be analysed in physical terms alone. Oil is priced in US dollars and traded through a financial infrastructure dominated by dollar-based settlement, liquidity provision, and messaging systems.
The Russia-Ukraine conflict demonstrated that this infrastructure can be constrained. Sovereign reserves were frozen. Financial institutions were excluded from the SWIFT system. Access to settlement and trade finance became contingent on geopolitical alignment rather than credit quality.
In this context, transparency is not risk-neutral. Public disclosure of strategic stock positions does not merely inform markets. It reveals exposure to a financial system in which access itself can be selectively restricted.
For countries structurally dependent on dollar-denominated energy trade, limiting disclosure can function as a form of financial risk management. Strategic silence reduces the information available about buffers, constraints, and response capacity under conditions where financial access is uncertain.
China’s opacity around its strategic and quasi-strategic oil stocks can therefore be interpreted as an adaptation to financial infrastructure risk rather than a deviation from market discipline.
Inventory observability as a risk trade-off
Inventory observability is often treated as an unqualified market good. In practice, it represents a trade-off between market efficiency and strategic optionality.
The US system minimises market uncertainty by maximising disclosure but accepts higher strategic and financial exposure. China’s system limits strategic exposure by restricting disclosure and transfers uncertainty to market participants.
Neither approach eliminates risk. Each reallocates it across domains such as price discovery versus resilience, transparency versus insulation from financial leverage, and signalling versus optionality.
Observable inventories therefore capture only part of the effective buffer.
This trade-off is not confined to major powers.
Infrastructure control and risk allocation: a smaller-state illustration
Smaller, import-dependent states are also adjusting how strategic oil stocks are governed, even when disclosure requirements remain unchanged.
In Cyprus, the national oil stock authority, KODAP, is developing state-owned petroleum storage facilities at the Vasilikos Energy Centre, transitioning away from reliance on leased third-party tankage.
While Cyprus continues to report strategic stock levels under EU transparency rules, ownership of the physical infrastructure alters the underlying risk profile. Direct control over storage reduces exposure to counterparty, contractual, and jurisdictional constraints in stress scenarios and improves the state’s ability to deploy stocks when market or financial conditions deteriorate.
The example illustrates a broader point. Strategic resilience depends not only on how much oil is held or how transparently it is reported, but on who controls the infrastructure and under what conditions it can be accessed.
Systems divergence and market implications
From a systems perspective, the divergence between the US and China is coherent rather than accidental.
The US framework prioritises rapid feedback, transparency, and market signalling. It performs effectively when financial access is assumed and constraints are primarily domestic.
China’s framework prioritises endurance, optionality, and insulation from external constraint. It is designed for environments where access to financial infrastructure itself cannot be taken for granted.
Markets misprice risk when they assume convergence between these systems. They are optimising for different risk surfaces.
Implications for risk management and policy
For trading desks, apparent balances should be interpreted with caution. Inventory data no longer defines the full buffer. Short-dated exposures, time spreads, and geopolitical premia are increasingly influenced by policy-driven stock movements that are only partially observable.
For energy importers and utilities, strategic reserves do not substitute for hedging. Physical buffers protect continuity of supply. Financial instruments protect affordability.
For policymakers, strategic petroleum reserves should be governed explicitly as multi-domain risk instruments, spanning physical supply, financial infrastructure, and geopolitical constraint, rather than as discretionary stabilisation tools.
Conclusion
The critical shift is not that US strategic stocks are lower or that China’s are higher. It is that oil risk is being redistributed across physical, financial, and geopolitical domains, between what markets can observe and what states choose not to disclose.
Transparency reduces informational uncertainty but can increase strategic exposure.
Opacity preserves optionality but increases market uncertainty.
Neither is free. Both are deliberate risk choices.
*George Christoforou is Independent Energy Risk Management Expert
Full Profile at: https://www.linkedin.com/in/giorgoschr/