China's Oil Stockpiles Help Mitigate Trump's War-Time Price Volatility

The ongoing conflict in Iran has been causing volatility in oil prices, but energy analysts say it could be much worse. President Donald Trump's war against Iran sparked dire warnings that oil prices could more than double during a protracted conflict.

However, six months into the conflict, the most dire projections have not yet come to pass, and some credit Chinese President Xi Jinping for this outcome. China has the world's largest oil stockpile, with about 1.4 billion barrels by the end of last year, according to U.S. Energy Information Administration estimates.

Beijing spent years and billions of dollars amassing this strategic reserve as part of its energy self-reliance strategy. This allowed China to cut crude imports once the U.S. 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.

The reduced demand for oil due to China's actions helped ease global demand, softening the upward price effects for the United States, Europe, and beyond. Analysts at Bank of America forecast oil at $83 a barrel for the second half of the year 'in light of more persistent disruptions to Hormuz,' but prices could reach $95 to $120 a barrel if violence escalates.

Before meeting Xi in Washington next week, Trump will meet with leaders of the Gulf Cooperation Council in New York. However, experts say that despite China's efforts to mitigate oil price shocks, the conflict remains tenuous, and global demand could still be affected by potential disruptions to the Strait of Hormuz.