The vessel was "carrying three Chinese sailors and 100,000 liters of oil [26,000 gallons] without clear origin" and it "illegally entered Vietnamese territory," Vietnam's official news agency reported.
It was seized Thursday by Hai Phong coastguards 12 nautical miles from the international boundary in the Gulf of Tonkin it said.
"The captain of the vessel admitted the oil was to be sold to other Chinese boats which were fishing illegally in Vietnam's waters," the report added.
Vietnam's Thanh Nien News said the ship's captain could not explain the origin of the oil while his two crew members did not have a work permit, citing the country's chief border guard.
There was no immediate reaction from China, which was observing a public holiday Monday.