China crude import cuts help cap oil prices below $100

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China crude import cuts

Highlights

China cut crude imports by nearly 3 million barrels a day, helping cap oil below $100.
J.P. Morgan says China accounted for about 74% of the drop in global crude imports.
Societe Generale warns prices may need to rise as inventories are depleted.

According to CNBC, the Middle East conflict has now reached its 100th day, yet the feared surge toward $200 oil has not materialized. Global oil supplies have fallen by about 14% since hostilities began on Feb. 28, mainly because of disruptions in the Strait of Hormuz, the narrow waterway between Iran and Oman that carries roughly one-fifth of the world’s seaborne oil shipments.

China becomes the pressure valve

Market strategists point to China as one of the main reasons the oil shock has been contained. Beijing cut crude imports from 11.7 million barrels a day in February to just under 9 million barrels a day by late May, a drop of nearly 3 million barrels a day. J.P. Morgan analysts said China accounted for about 74% of the decline in global crude imports, a disproportionate share that helped keep markets calmer than expected.

Societe Generale analysts described China’s reduction as one of the largest offsets to the supply shock, second only to Saudi efforts to reroute flows. They said it was larger than coordinated strategic reserve releases by the U.S., Europe, and Japan.

The reduction reflects both weaker refining activity and deeper structural shifts in China’s energy system. Analysts at GlobalData TS Lombard said China’s rapid electrification of transport and energy production since 2022 has moved the country closer to an energy surplus. Official and quasi-official crude stockpiles have also helped Beijing absorb the disruption without bidding aggressively for imported barrels.

Fresh strikes revive the risk premium

On Monday, Brent crude rose above $97 a barrel after Israel and Iran exchanged missile strikes, while U.S. West Texas Intermediate (WTI) crude approached $95 a barrel. The move showed how quickly geopolitical risk can return to prices when the conflict widens.

Analysts are split on what comes next. J.P. Morgan expects a June reopening of the Strait of Hormuz to keep Brent around $100 for the rest of 2026. If the closure lasts longer, the bank estimates prices could rise by an additional $5 in the third quarter and $15 in the fourth as inventories deplete more quickly.

Fitch takes a softer view, arguing that a late July reopening could send Brent sharply lower, toward an average of $70 from September, because the current spike reflects a temporary logistical shock rather than permanent lost production.

The inventory bill is coming due

Societe Generale argues that the market will still need higher prices because strategic reserves must be rebuilt and new supply requires stronger returns.

A 14% supply drop has pushed prices up by about 30%, partly because China has absorbed a significant share of the adjustment. That makes the current market more stable, but also more dependent on temporary buffers.

We also reported oil rises above $97 after the new Israel-Iran exchange of strikes.

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