How China Became the Ultimate Swing Oil Buyer
Oil Prices Head for 20% Monthly Surge Despite Recent Pullback Nigeria says regulatory reforms, stronger… What I Cover Tsvetana Paraskova is an energy and commodities journalist who has contributed to Oilprice.com for nearly a decade, covering global energy markets, commodities,… Five months of mostly closed Strait of Hormuz have not sent oil prices spiking to $150 or $200 per barrel, as many analysts had warned in March.
Even as more than 10% of global crude oil supply suddenly disappeared from the market, oil didn’t hit record high levels.Crude oil priceshaven’t even stayed permanently above $100 per barrel.
Three key drivers have kept oil prices from surging to never-before-seen highs.
First, governments started tapping strategic reserves, including as part of the IEA-coordinated 400-million-barrel stocks release, to offset the 1 billion barrels of crude that never made it out of the Gulf in the first three months of the conflict.
Next, Asia slashed consumption with fuel-saving measures and reduced refinery throughput.
Crash in China’s Crude Imports Kept Prices Capped Arguably, the biggest cushion the market has had was China’s crude oil import behavior.
The world’s largest crude oil importer had amassed an estimated up to 1.4 billion barrels of crude in commercial and strategic stockpiles before the Iran war.
The huge cushion allowed it to slash imports when the Strait of Hormuz closed, and prices spiked.
Ever the opportunistic buyer, China withdrew from the spot market amid the Middle East crisis, and by slashing this import demand, Beijing single-handedly offset part of the lost supply.
The market appeared to have underestimated China’s ability to be as flexible in its crude oil imports as to slash purchases by as much as 40% in June compared to pre-war levels.
In addition, during the crisis, China has also seen soaring EV use, a massive switch to coal, and rising shares of power generation from renewable energy sources.
China’s crude importing policy of the past few months, certainly influenced by the authorities, managed to keep international crude oil prices capped as about 4 million barrels per day (bpd) of crude didn’t have to reach Chinese refiners in the past three months.
| Product | Price | Change |
|---|---|---|
| Brent Crude | $102.14/bbl | +0.34% |
| WTI Crude | $96.90/bbl | +0.21% |
| EN590 Diesel | $846/MT | +0.18% |
| Jet Fuel A-1 | $1090/MT | +0.55% |
| Mazut M100 | $450/MT | -0.15% |
| Bitumen 60/70 | $470/MT | +0.08% |
| Sulphur Gran 99.5% | $470/MT | -0.44% |
| Urea 46% Gran | $650/MT | +1.12% |
| NPK 16-16-16 | $460/MT | -0.28% |
| Nat Gas TTF | $15.42/MMBtu | +0.92% |
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