China’s oil pullback keeps prices far lower

China cut – Gas prices in the U.S. have stayed lower than many analysts predicted as the Strait of Hormuz faced its worst feared disruption in history—largely because China has sharply reduced crude oil imports. The result is millions of barrels per day rerouted to other

Americans are paying roughly a dollar more per gallon than they were a year ago. and it’s been a tense stretch for oil watchers. Even so. with the Strait of Hormuz closed for roughly the first 100 days of the current disruption—something the International Energy Agency called the “most severe oil supply shock in history”—many expected prices to surge much harder than they have.

When the Hormuz crisis began, analysts were openly forecasting oil could climb as high as $200 a barrel. That would have put gasoline in a very different neighborhood: around $6.50 to $7 per gallon. Instead, oil is trading at less than $90 a barrel. The feared 1970s-style gas lines never arrived, at least not in the way many had predicted.

Diplomacy appears to have helped, and prices have never risen above about $114. After Russia’s invasion of Ukraine in 2022, oil reached much higher levels; this moment looks notably different. The question now is what, exactly, is keeping the market from breaking.

One explanation is that more oil is still leaving the Middle East than many thought possible—moved through alternative pipelines and even through covert routes connected to Hormuz itself. Another is that oil-producing countries that don’t rely on the strait, especially the US, are ramping up production. Still others are drawing on strategic reserves.

But the biggest factor, and the most unexpected, is that China—the world’s most voracious crude buyer—has largely stopped purchasing as much.

China is normally the top crude oil importer. During this disruption, its imports have fallen from around 11.6 million barrels a day to around 7.8 million—the lowest levels since 2017. In practical terms, that shift means millions of additional barrels per day are available for other countries to buy.

For everyone else, that’s good news. For China, it creates a sharper mystery.

“If I knew nothing else about what was going on and I was just looking at my data. I would assume there had been a demand collapse on par with the Covid-zero lockdowns. ” said Rory Johnston. a Toronto-based oil market researcher. pointing to the kind of draconian policies the Chinese government used during the pandemic that effectively halted large parts of the domestic economy. “But that’s strange, because I haven’t seen any news about China relocking down its economy.”.

So the picture does not match a demand crash. China’s economy, according to the available indicators cited, has not cratered. Industrial output. automobile traffic. pollution. and other economic measures suggest the country is “humming along as normal.” In recent years. the state has also made major investments in green energy and electric vehicles—efforts that may help cushion the impact. but are “still not enough” to explain the scale of the import drop.

Instead, the pattern looks like the outcome of something longer in the making. Back in 2023. many analysts were perplexed that China was dramatically increasing crude oil imports while refineries churned out much higher volumes of gasoline and diesel. even as the economy showed signs of slowing. There appeared to be little demand for all that fuel at the time.

Now, the explanation offered is that the country may be drawing down the fuel it stocked earlier.

China’s government has not laid out the rationale for cutting imports during the current conflict. nor has it publicly acknowledged that it is doing so. The closest to an official acknowledgement comes from US Energy Secretary Chris Wright. who said China is releasing oil from its strategic petroleum reserve.

There is a problem with that story. at least as it’s been observed: the strategic reserve tanks in China that are visible to commercial satellites appear to be just as full. if not fuller. than they were before the war. That leaves a question hanging over the numbers—where is China getting the oil it needs if the visible tanks don’t look drawn down?.

Johnston’s most likely possibility is that China has large underground reserves that are not visible from outside. The government has also mandated that state-owned commercial companies maintain their own strategic petroleum stocks. Either way, the working conclusion is that China has more oil on hand than expected.

How long that can continue is harder to pin down. Johnston said it is difficult to estimate because estimates of China’s stocks range from half a billion barrels to one and a half billion. In theory, though, it could last for months.

Why Beijing is doing it may matter as much as how. One possibility raised is that when President Donald Trump and Chinese President Xi Jinping met in May. they reached some kind of agreement for China to reduce its imports—an outcome Trump could benefit from politically. But the idea doesn’t fit easily, at least not with the logic offered.

It seems unlikely. the argument goes. that Xi would accept a move that effectively underwrites a war involving one of China’s allies. It also seems unlikely that Trump would keep quiet about extracting a concession of that scale. Another possibility is that China sees a benefit in preventing a full-blown crisis in the countries that are its most important export markets.

And that’s where the tension deepens: even if China’s aim is to protect its own trade lanes, the impact may be prolonging the war.

Trump is clearly eager to reach a deal to reopen Hormuz. But the pressure may be dulled. The urgency might look different if oil were at $150 a barrel rather than $90 a barrel—meaning Americans would feel the pain more directly during a pivotal election year. For all the attention focused on how Chinese missiles and satellites might be helping Iran’s war effort. the argument here is that energy policy could be the counterweight: assistance via oil markets may be helping the US more than the war-planning conversation suggests.

Beyond the conflict. the broader implication described is that China’s approach could expand its ability to “weaponize” its role in the global economy—a field of competition the US long dominated. Eurasia Group oil analyst Gregory Brew put the idea in stark terms on X: “The world doesn’t have a swing producer any more. ” referring to how Saudi Arabia’s oil production capacity once allowed it to almost single-handedly swing global energy markets. “but it may have a swing consumer.”.

In other words, the market doesn’t have a single producer who can easily force prices up or down—so China’s purchasing power becomes the lever.

The risk, from the viewpoint laid out, is that keeping prices lower now could eventually mean China pulls the rug later. If it wanted to, China could in theory jack up the world’s prices as well.

There’s also a simpler explanation rooted in behavior rather than strategy: China is traditionally inclined to stockpile—whether oil. strategic metals. or even pork. When it began its oil-buying spree a few years ago. speculation included that it might be preparing for a major global crisis. including an invasion of Taiwan.

Even then. there was an assumption that the disruption triggered by a Taiwan war would lead to “mutually assured economic destruction” strong enough to deter Beijing. But what the current facts suggest is that China may be more insulated from that kind of disruption than previously believed—and. just as importantly. more capable of creating disruption of its own.

For now, the market is still absorbing the shock without breaking the way many expected. The closure of the Strait of Hormuz looms large. but prices are staying below $90 a barrel instead of racing toward $200—because China. by cutting imports from around 11.6 million barrels per day to around 7.8 million. is effectively redirecting a huge amount of supply into the rest of the world. The human impact is not abstract: it’s visible at the pump. where Americans are paying about a dollar more than last year rather than facing the kind of spike many feared.

Whether China can keep that bargain—months at most, perhaps—remains the unresolved question. The answer will determine how long global buyers get the extra barrels, and how long China holds onto the kind of influence that can quietly shape world prices.

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