Not the US or Iran: This Country May Decide if Oil Prices Rise or Fall

While diplomatic efforts between the United States and Iran have eased tensions around the Strait of Hormuz, China's strategic actions have played a crucial role in stabilizing the global oil market, preventing the price spikes many experts predicted.

Despite months of heightened tensions in the Middle East and warnings of potential energy shortages, the oil market has remained remarkably stable. According to a CNN analysis, this stability is not solely due to diplomatic maneuvers but significantly influenced by China's recent policies. As the world's largest oil importer, China has reduced its crude oil purchases, utilized its existing stockpiles, and accelerated its transition to alternative energy sources, thereby lessening the pressure on the global market.

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China has played a key role in mitigating the consequences of the crisis for Asia, but also for the world economy.

Analysts had warned that oil prices could reach $200 per barrel during the conflict, but this scenario did not materialize. Daan Walter from the energy think tank Ember told CNN that China's actions were pivotal in softening the crisis's impact on Asia and the global economy. Expectations of a normalization of traffic through the Strait of Hormuz have also contributed, with Brent crude prices falling below $78 per barrel early in the week, signaling investor confidence in supply chain recovery.

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China is described as a kind of 'invisible hand' that rebalances the market.

Société Générale analysts estimate that the conflict affected about 14% of global oil supply, yet the market absorbed this shock more effectively than during previous energy crises. Experts describe China's role as an "invisible hand" rebalancing the market. The country managed to reduce its import needs by approximately three million barrels per day, easing global demand during a period of heightened uncertainty. Rystad Energy's Janiv Shah noted that China has built substantial strategic reserves over years, leveraging favorable supplies from Russia and Iran, and began drawing from these reserves in May.

Simultaneously, Beijing restricted gasoline and diesel exports to ensure domestic supply stability, further reducing its refineries' need for international crude purchases. The rapid electrification of China's transport sector, where nearly half of all new cars sold are now electric or hybrid, has also significantly impacted oil consumption. The International Energy Agency (IEA) estimates that China's electric vehicle fleet reduced daily oil consumption by roughly one million barrels last year. David Fishman of Lantau Group believes this shift was a key factor preventing a more substantial price increase during the crisis. However, analysts caution that relying on existing reserves is not a sustainable long-term strategy.

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China has been building large strategic reserves for years, using favorable deliveries of Russian and Iranian oil.