China’s Crude Imports Reduction Since U.S-Iran War Cushions Oil Prices, But Not For Long

A significant drop in oil imports from China has helped prevent global oil prices from skyrocketing after the outbreak of the U.S.-Iran war.

Even though the war has now lasted 100 days and is still ongoing, and the global oil supply fell by 14%, due to the closure of the Hormuz Strait, fears of the oil reaching $200 per barrel have not come true.

China has played a major role in stabilising oil prices by cutting its crude oil imports from 11.7 million barrels a day in February to just under 9 million by the end of May.

According to market analysts, Beijing’s shift towards renewable energy and electric vehicles, along with its massive oil stockpiles, allowed it to take this path.

Other measures undertaken by the U.S, Japan and Europe, such as releasing emergency oil reserves and increasing oil production from Brazil and Venezuela, also helped stabilise the global oil market.

However, despite the current situation, energy experts say that prices would rise again to rebuild the depleted oil reserves.

Oil prices recently jumped nearly 5%, with Brent crude reaching $97.67 and U.S. West Texas Intermediate rising to $94.93, after Israel and Iran were involved in missile strikes.

Analysts now stand divided on where oil prices will go next.

J.P. Morgan predicts that if the Strait of Hormuz reopens in June, Brent crude will stay around $100 for the rest of the year.

Fitch analysts say that if Hormuz reopens in July, prices could drop to an average of $70 per barrel by September.

Financial institutions like Societe Generale warn that the long-term price of oil will likely be higher as the market will adjust to the aftermath of the U.S.-Iran war.