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The world’s second largest economy has increased its crude oil imports for two months following a trough in June
By Gigi Suhanic
China could once again wield its hand in the crude oil market after the world’s largest importer of the fossil fuel helped keep prices from rising more than they did, say oil market analysts.
“The biggest, most important factor that had helped oil markets balance at the peak of the supply loss in March, April and May was China’s dramatic pullback in crude buying,” Rory Johnston, founder of oil market research company Commodity Context, said. “Now that it’s returning, you’re going to further tighten those balances.”
Following the start of the war on Iran and the resulting throttling of 20 per cent of the world’s oil supplies through the Strait of Hormuz, China’s oil imports plummeted to 29 million tonnes at the end of June from a high in 2026 of 50 million tonnes in March, according to Bloomberg data. Its imports have since rebounded to just under 40 million tonnes at the end of August.
“China is an important part of the story,” Marc Ercolao, an economist at Toronto-Dominion Bank, said in a report in early August, referring to steps taken by the world’s second-largest economy to cut back crude oil imports by an amount equal to approximately five per cent of global demand, helping to “offset some supply pressures over the past year.”
But China is ramping up imports again at a time when tanker crossings dropped to one on Monday from 80 a day prior due to the renewed eruption of the conflict between the United States and Iran, according to data from Bloomberg based on ship transponders.
Ercolao said China’s increases in imports will put more “upward pressure” on oil prices if they continue.
However, he said the geopolitical turmoil, including the absence of a peace deal between the U.S. and Iran and the recent attack on Saudi Arabia’s energy infrastructure by the Houthis, who are based in Yemen, is still more important.
“Those are the biggest factors that are driving the risk premium right now,” he said. “China is more of a secondary, but very important, story.”
China has increased its crude oil imports for two months following a trough in June, which Johnston said is not enough to speak to a “durable recovery in demand.”
However, he said China is buying oil at market prices because, in addition to it drawing down its commercial crude oil reserves, the current pace of supply of refined oil products — such as diesel — is not inherently sustainable.
“As that begins to dwindle, they will be forced to go back into the global market for crude,” he said.
Ercolao said China isan emerging factor, especially since a lot of people underestimated the impact that reduced Chinese imports would have on helping to lower prices.
“Now that there’s some evidence that they’re durably purchasing oil again, it is hitting people’s radars that, ‘OK, we have this potential big source of demand coming through,’” he said.
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