China's Oil Stockpiles Shield Global Markets from Strait of Hormuz Closure

The Strait of Hormuz is one of the most critical oil shipping lanes in the world, and its closure should have caused significant shockwaves to global oil markets. However, due to China's strategic stockpiling policy, the impact has been less severe than expected.

Before the war, the strait carried approximately 20 million barrels per day (bpd), which accounts for a fifth of global daily oil consumption. With an estimated 10-14% of global supply remaining inaccessible six months on, one would expect oil prices to skyrocket. Yet, current oil prices have only risen by around 50%, with Brent crude stabilizing near $85-90 a barrel.

This relatively modest price increase can be attributed to China's decision to halt new crude oil purchases and rely on its strategic stockpiles instead of buying at inflated prices. This policy has helped mitigate the impact of the Strait of Hormuz closure, which would have otherwise caused significant disruption to global supply chains.