China's Oil Reserves Help Contain Iran War Price Shock

As Chinese President Xi Jinping prepares for his state visit to Washington, analysts say China's energy strategy has played a major role in preventing a bigger global price shock from the Iran war. Six months after President Donald Trump launched the conflict, the sharpest warnings on oil prices have not materialized.

The United States had benefited indirectly from Beijing's actions, according to Rosemary Kelanic, director of the Middle East programme at Defence Priorities. 'We've been free-riding off Beijing in a weird way,' she said. China spent years and billions of dollars building its strategic oil reserve, which has allowed it to sharply cut crude imports after the US and Israel began bombing Iran.

The buffer created by China's large oil reserves and lower imports has eased pressure on global markets, but analysts caution that the situation remains fragile as disruptions spread across the Middle East. The US administration has warned China not to help Iran's military effort, but Trump has also downplayed a report that Chinese entities had provided Tehran with satellite images of a Jordanian military base before an Iranian strike in July.

Energy analysts say Beijing's sharp reduction in imports has had the biggest effect in containing prices since the war began. According to US data, China's crude imports averaged 8.1 million barrels a day in the second quarter, almost 4 million barrels a day, or 32 per cent, lower than in the first quarter.