China Takes Brunt of Asia's Oil Demand Cut Amid Middle East Supply Disruptions

China has been shouldering much of the reduction in crude oil demand across Asia as shipments from the Middle East have fallen sharply following the Iran conflict, according to Reuters. The world's largest oil importer significantly cut its purchases in recent months, with imports averaging around 7.78 million barrels per day (bpd) for June and July, down by roughly 4.21 million bpd from the 11.99 million bpd average recorded during the three months through February.

The sharp decline in imports comes after the United States and Israel attacked Iran on February 28, triggering an escalation in the conflict that effectively disrupted traffic through the Strait of Hormuz. The waterway handled about 20% of global crude oil and refined petroleum product shipments before the conflict, but overall crude flows from the Middle East have still fallen by around 5 million bpd.

Most Middle Eastern crude exports are destined for Asia, making the region particularly vulnerable to the disruption. China imported about 8.41 million barrels per day (bpd) of crude oil in July, a recovery from the near-decade low of 7.12 million bpd recorded in June. However, July imports were still 24.3% lower than a year earlier.

Higher oil prices have also added to China's demand pullback, with Brent futures surging to a four-year high of $126.41 a barrel on April 30. Analysts estimate China's stockpiles at at least 1.2 billion barrels, leaving the country considerable scope to maintain lower imports.