Beijing's Oil Stockpile Shields Global Economy from Iran War Price Spikes

When US President Donald Trump launched his war against Iran in late February, energy analysts warned of a potential oil price spike. Six months on, while prices remain volatile, they have not reached the dire levels predicted.

China's massive oil stockpile is being credited with helping to moderate global demand and ease upward pressure on oil prices. The country has been building its strategic reserve for years, amassing about 1.4 billion barrels by the end of last year, according to estimates from the US Energy Information Administration.

With Iran's top buyer, China drew down its imports once the US and Israel began their bombardment and Tehran effectively closed the Strait of Hormuz. The country also benefited from its shift toward electric vehicles in recent years and tapping into other energy alternatives.

Analysts at Bank of America forecast oil at US$83 a barrel for the second half of the year, citing disruptions to Hormuz. However, if violence escalates and keeps a chokehold on traffic, prices could reach US$95 to US$120 a barrel or even spike up to US$150 a barrel with damage to major energy infrastructure.

US President Trump is set to meet Chinese President Xi Jinping next week in Washington, but the prospects of a breakthrough appear dim. The two leaders have deep differences on Iran, and analysts say there's little altruism in how China came to sit on its massive stockpile of oil, which was driven by contingency planning for potential military action to take over Taiwan.