The China surprise

The big picture: "If Chinese imports had stayed at prewar levels, oil prices would almost certainly be significantly higher today," says Salih Yilmaz, a senior oil analyst at Bloomberg Intelligence.

• The country "has probably been one of the single biggest reasons oil prices didn't spike much higher during the Hormuz disruption."

The intrigue: How has China done it? "China's inventory system is very opaque," Yilmaz says.

• Analysts mostly track visible tanks and tanker flows, but China's massive underground Strategic Petroleum Reserve and other stockpiles are much harder to observe, he says.
• China's reportedly still managing to buy some Iranian barrels.

State of play: Since the war began, the Strait of Hormuz has effectively been shut — cutting off 20% of the world's supply of oil.

• While oil prices are now much higher, they are nowhere near as high as predicted at the outset of the conflict.

The latest: Brent crude, the global benchmark, is back below $100 a barrel on hopes for a ceasefire extension.

• That's a rise of 30% since the start of the year. But analysts were forecasting $200 a barrel in a prolonged conflict.

Zoom in: Before the war, China was importing about 11 million barrels of oil per day. In April, that number was 9.3 million, writes Michal Meidan, head of China Energy research at the Oxford Institute for Energy Studies, in a new report. May and June numbers are expected to fall to 6.5 million.

• That reduction has kept global oil demand in check and reduced upward pressure on prices.
• China did this without any observed release from its oil reserves.
• The government is allowing refiners to draw down stockpiles from commercial reserves. But visible stocks have only inched down since March, she notes.

How it works: China has pulled other levers to deal with the shortfall.

• It has stopped aggressively buying oil to build rainy day stockpiles.

• Oil refineries have cut the amount of crude they're processing and changed the mix of what they produce.
• They're using coal to produce certain chemicals instead of oil.
• China temporarily banned exports of certain refined oil products.

What to watch: How long China can keep this up without meaningfully drawing on its reserves or resuming the import of more oil.

Reality check: Global oil inventories are being drained at a record pace, the International Energy Agency warned earlier this month.

• Just Thursday, an Exxon Mobil executive said: "We're approaching unheard-of-inventory levels."

Between the lines: China has been operating for a while like a doomsday prepper, to borrow an analogy from Soumaya Keynes and Chad Bown's new book, "How to Win a Trade War."

• The country has been stockpiling reserves and building capacity to store oil in case of a crisis.
• China buys a lot of oil from Iran and has watched for years now as U.S. sanctions have drawn tighter and tighter around its ally.
• Last year, China was buying so much oil for its reserves that it was propping up global prices, Rystad Energy analysts wrote in a note in September 2025.
• It's a sharp contrast to the U.S., which failed to top up its strategic oil reserve when prices were low last year.

The bottom line: China has crude leverage.