China's oil reserves help temper global prices amid U.S.-Iran conflict

Oil prices have risen sharply since President Donald Trump ordered strikes against Iran in February, but they have not reached the levels some analysts warned could double. The market has been steadied, in part, by China’s strategic petroleum reserve, the world’s largest, which held about 1.4 billion barrels at the end of last year, according to U.S. Energy Information Administration data. By drawing down its stockpile and cutting crude imports, China – the second-largest oil consumer and Iran’s top buyer – reduced global demand, easing upward pressure on prices for the United States, Europe and other regions.

"The Chinese deserve credit," said retired U.S. Navy Rear Adm. Mark Montgomery, an analyst at the Foundation for Defense of Democracies.

Bank of America analysts project Brent crude around $83 a barrel for the second half of the year, though they warn that continued disruptions in the Strait of Hormuz could push prices higher, potentially reaching $95-$120 a barrel, with extreme scenarios topping $150. Brent crude, which averaged $69 per barrel in 2023, is currently near $100 and briefly peaked at $126 in late April.

China’s energy strategy, outlined in its latest five-year plan, emphasizes self-reliance and has been supported by years of investment in reserves and a shift toward electric vehicles and alternative energy sources. The reduction in Chinese imports fell to about 8.1 million barrels per day in the second quarter, roughly 32 % lower than in the first quarter, according to U.S. data.

The United States and China are set to meet in Washington next week, with the Iran conflict expected to be a discussion point. However, differences remain, as the Trump administration has urged Beijing to use its economic influence to pressure Iran, while Chinese officials have resisted increased U.S. pressure on nations doing business with Tehran.