China's Oil Stockpiles Deflate Global Prices Amid Hormuz Disruptions

The recent closure of the Strait of Hormuz should have caused significant disruptions to oil markets, but its impact has been surprisingly muted. Analysts point to China's policy of relying on strategic stockpiles rather than purchasing crude oil at inflated prices as a key factor.

China's reserves amount to over 1.2 billion barrels, which could last for at least a year. To minimize the disruption caused by the war, Beijing has halted seaborne crude imports and reduced consumption by restricting exports of refined products such as diesel, petrol, and jet fuel.

Experts believe that when China begins restocking its reserves in full, it could have substantial repercussions on global oil markets. In July, China posted a small surplus of 210,000 barrels per day (bpd), which reflected Chinese refiners slowing output faster than exports had dropped.