China cut oil imports 32% during Iran war: How Beijing helped contain the global price shock

China sharply reduced its crude oil imports during the first half of the Iran war, helping ease pressure on global oil demand even as disruptions around the Strait of Hormuz pushed prices higher, The Associated Press (AP) reported.

Chinese crude imports averaged 8.1 million barrels per day in the second quarter, nearly 4 million barrels per day, or 32%, lower than in the first three months of the year, according to US data cited by AP. Analysts said the reduction was one of the biggest factors helping moderate the impact of the conflict on global oil prices.

China draws on massive oil reserves

China entered the conflict with a significant buffer. According to estimates from the US Energy Information Administration cited by AP, Beijing had built its strategic petroleum reserve to around 1.4 billion barrels by the end of last year.

The stockpile has been accumulated over years as part of China's strategy to protect the world's second-largest oil consumer from disruptions in overseas supplies.

When the US and Israel began their bombardment and Iran effectively closed the Strait of Hormuz, China was able to draw on those inventories and reduce its dependence on fresh crude imports.

China is also Iran's top oil buyer, making its ability to rely on stored supplies particularly significant during the conflict.

Lower Chinese demand eases global pressure

The sharp reduction in Chinese imports meant less competition for crude in international markets at a time when supply routes were under severe pressure.

“It's remarkable how China managed the market,” Michael Lynch, president of Strategic Energy and Economic Research, told AP. He said Beijing did not panic and used its inventories, helping keep prices lower globally.

Retired US Navy Rear Adm. Mark Montgomery, an analyst at the Foundation for Defense of Democracies, also credited China's stockpiling strategy with helping the country weather the disruption.

China's broader shift toward electric vehicles and alternative energy sources has also reduced its exposure to oil demand, according to AP.

Oil market remains vulnerable

Despite China's buffer, the global oil market remains exposed to further disruptions.

Brent crude, which averaged about $69 a barrel last year, was hovering around $100, while prices briefly reached $126 in late April, AP reported.

Bank of America analysts said oil could average $83 a barrel in the second half of the year if shipping through the Strait of Hormuz gradually recovers. However, they estimated prices could rise to $95-$120 a barrel if violence escalates and shipping remains severely disrupted.

Damage to major energy infrastructure could push prices as high as $150 a barrel, the analysts said.

China's strategy has therefore provided a buffer, but AP noted that the resilience is facing fresh challenges as Iran-backed groups threaten energy infrastructure and shipping routes in the Middle East.