China Emerges as World's Swing Demand Centre Amid OPEC Disruption

OPEC's dominance in the global oil market has been weakened by the disruption through the Strait of Hormuz, caused by the Iran war. This has exposed a fundamental weakness in OPEC's model: announcing more production means little if the barrels cannot reliably reach customers.

According to Reuters, OPEC+'s share of global oil production has fallen from over 48% before the conflict to around 40% in July. The core group of seven producers, including Saudi Arabia and Russia, now represents only about a quarter of world production.

Saudi Arabia is adapting by increasing the amount of oil it can move without relying on conventional passage through Hormuz. It has sold cargoes using ship-to-ship transfers outside the Strait, including millions of barrels destined for Chinese refiners.

On the other side of the market, China's ability to influence demand has become increasingly obvious. Reuters estimates that China has imported approximately 400 million fewer barrels of oil since the war began than during the corresponding period last year.