Surprise in the oil market: How did China manage to increase stocks at the height of the crisis?
Despite the drop in oil imports and severe damage to the Strait of Hormuz following the war in the Middle East, Beijing managed to add barrels to its national inventory. This is the strategic planning that calmed the markets and fears of the next price spike.
A surprise in the global energy market: despite a dramatic decline in oil imports and severe supply chain disruptions following the war in the Middle East, China managed to unexpectedly record a slight increase in its oil reserves during the month of July. The world's largest oil importer added about 210,000 barrels per day to its stocks, after having been forced to draw oil from its strategic reserves in previous months.
The main factor that allowed China to avoid a large-scale withdrawal of oil from its massive inventory, estimated at about 1.2 billion barrels, was its decision to sharply reduce the volume of oil refining in the country. Local refining dropped by 15.8% compared to the same period last year. In addition, Beijing restricted fuel exports and adjusted its internal demand to the emergency situation.
The global oil shortage has worsened since the partial closure of the Strait of Hormuz following the military confrontation between the USA and Israel against Iran. The fighting led to a reduction of about 5 million barrels of oil per day from the global market. Despite the sharp decline in China's maritime imports, the drastic measures it took allowed it to act as a major shock absorber in the commodities market.
China's easing of fuel export restrictions in August now raises concerns that it will attempt to increase crude oil imports again. Such a move could lead to a renewed spike in global oil prices, especially around the strained supply chains from the Middle East.
