China’s oil import cuts helped stabilize global prices during Iran war, analysts say

As the U.S.-Iran war approaches its sixth month, China's decision to sharply curtail crude oil imports has emerged as one of the most consequential factors keeping global energy prices from spiraling out of control, defying early forecasts of a catastrophic price spike following the effective closure of the Strait of Hormuz.

A Demand Shock by Design

Through June, Chinese oil imports remained down more than 40% from the previous year, according to Axios reporting on Wednesday. What initially appeared to be standard price-sensitive buying behavior by the world's largest oil importer has evolved into a sustained strategic posture that analysts say has reshaped global energy markets.axios

"I guess the surprise has been just how low Chinese demand can go," said Michal Meidan, head of China energy research at the Oxford Institute for Energy Studies. "But it's been low without impairing the well-functioning of the economy."axios

Goldman Sachs ↘ 0.63% analysts identified several levers Chinese policymakers have pulled: tapping domestic reserves of coal, oil, and natural gas; boosting coal and renewable energy usage where import reliance is lower; and leveraging the country's large electric vehicle fleet. Goldman analysts noted that "despite much lower gasoline consumption, traffic congestion remained relatively stable."axios

The Decisive Swing Demand Setter

"They are the major swing demand setter in the global oil market, for sure," said Jane Nakano, senior fellow in the Energy Security and Climate Change Program at the Center for Strategic and International Studies. Goldman Sachs analysts wrote last week that "China has drastically reduced its net imports of fossil fuels, effectively acting as a shock absorber for global energy prices through reduced demand."axios

Reid I'Anson, a Houston-based economist at global commodities consulting firm Kpler, told Axios that "China has been a key player in helping the global economy navigate this crisis."axios

China was not alone in cushioning the blow. Rich nations released large amounts of oil from strategic reserves, and U.S. energy companies boosted exports to meet global demand. But China's sheer scale as a buyer gave its withdrawal outsize market impact.axios

Strategic Benefits and Growing Expectations

The crisis has also accelerated China's clean energy exports, with electric vehicle shipments soaring by more than 110% in May and solar exports increasing by 60% in April, according to data highlighted by the Asia Group. As oil producers compete for reduced Asian market share, China has consolidated its position as what analysts describe as a decisive market maker.thinkchina

Yet this influence brings new pressures. Gulf Arab states are now looking to Beijing to use its economic leverage over Iran to help reopen the Strait of Hormuz, testing how far China is willing to go as a diplomatic actor, according to Reuters reporting. "China has turned out not to be as influential as we thought — whether that is a lack of will or a lack of capacity is debatable," one Gulf source told Reuters.economictimes

Early indications suggest a modest bounce in Chinese oil purchases in July, a development analysts are watching closely for signs that the period of maximum demand restraint may be ending.axios