Michael Lewis, head of commodities at Deutsche Bank, said Chinese officials at Beijing's Strategic Reserve Bureau are playing the oil market tactically, or "buying the dips" in trader parlance. They add to stocks whenever Brent crude prices fall to key support lines.
"It's very similar to what they have been doing with copper. Whenever it drops below US$7000 [a tonne], they see it as a buying opportunity. They do the same with agricultural commodities," he said.
China is putting a floor of sorts underneath the global oil market, calling into question predictions by the big oil trading banks that prices will deflate this year as more crude comes on stream from Libya, Iraq, and Iran, and as the US keeps adding supply shale.
The strategic buying could go on for a long time since China is rapidly expanding its reserve capacity from 160 million barrels to 500 million by 2020.
John Mitchell from Chatham House says China has stocks to cover 46 days of imports compared to 209 for the US, based on estimates from last year. India is acutely vulnerable to any disruption with just 12 days' cover. The minimum safe threshold for OECD states is 90 days.
Chinese officials are increasingly nervous as the country's import dependency keeps climbing, reaching 60 per cent level this year. This is deemed to be the danger line. Planners have been studying closely what would happen in a global conflict such as full-blown Mid-East war or closure of the Straits of Hormuz. East Asia is now far more vulnerable to Mid-East oil disruptions than the US.
China's stock-build comes as the West steps up threats of "Stage 3" sanctions against Russia, to be triggered if the Kremlin continues to disrupt the Ukrainian elections through paramilitary proxies in the Donbass region.
Sources in Washington say the US may include Russian oil companies such as Rosneft among the mix of targets. This is thought less disruptive for European allies than quarantine measures against the gas monopoly Gazprom since gas is mostly supplied by pipeline contracts and is much harder to replace. The US has already sanctioned Rosneft's chairman Igor Sechin, the chief architect of the Kremlin's energy policy over the past decade.
Lewis said any move against the energy industry would risk a disruption of physical trading in oil since most banks would be unwilling to handle the transactions. "It would effectively tighten supply and be bullish for crude prices," he said.
A parallel drama is unfolding in Southeast Asia where China is building what appears to be an air base on the Johnson Reef, just off the Philippine coast. China is also at daggers drawn with Vietnam after towing an oil rig into waters off the Vietnamese coast in the South China Sea. This has erupted in a wave of anti-Chinese violence over recent days, killing an estimated 20 people in Vietnamese cities and prompting China to evacuate 3000 of its citizens.
There is the risk of a dangerous tit-for-tat spiral.The Chinese media has been calling for action to "teach Vietnam a lesson", echoing the language of Chinese leader Deng Xiaoping before he launched an attack on Vietnam in the disastrous war of 1979.
Oil experts says there is no sign yet that China is hoarding diesel or boosting output of refined products such as jet fuel, the sorts of indicators that might point to preparations for possible conflict.
China's oil imports in April mostly came from Russia, Angola, and Iraq. The IEA said there were also 615,000 barrels a day of shipments from Iran, a huge increase that underscores just how far global sanctions have eroded since Iran's new leader Hassan Rouhani reached a preliminary deal with the major powers over the country's nuclear programme.
