How China’s Oil Stockpiles Are Stabilizing Global Energy Prices

Global crude oil markets face severe volatility as a military conflict in the Middle East grinds through its sixth month, yet prices remain well below dire initial projections largely due to aggressive energy stockpiling by China, according to financial analysts and industry reports.

When the United States launched military actions against Iran in late February, energy analysts warned that a protracted conflict could more than double crude prices. While Brent crude averaged roughly $69 per barrel last year and spiked to $126 in late April, prices are currently hovering around $100 per barrel, according to reporting from the Associated Press.

That stabilization stems in part from Beijing scaling back its crude imports. According to estimates from the U.S. Energy Information Administration cited by the Associated Press, China spent years and billions of dollars building its strategic petroleum reserve to roughly 1.4 billion barrels by the end of last year. Chinese President Xi Jinping prioritized energy self-reliance within the nation’s latest five-year plan to protect against foreign supply shocks.

When bombardment began and Tehran effectively closed the Strait of Hormuz, China drew from those massive domestic reserves. That buffer, combined with a swift domestic shift toward electric vehicles and alternative energy sources, allowed the world’s second-biggest oil consumer to cut imports and alleviate upward demand pressure on the United States, Europe, and global markets.

“We’ve been free-riding off Beijing in a weird way,” said Rosemary Kelanic, director of the Middle East program at Defense Priorities, in statements reported by the Associated Press. “China’s doing it because they understand that they’re on the train that Trump is driving off a cliff. If oil prices go way up, that hurts the global economy. If it hurts the global economy, it hurts them.”

Retired U.S. Navy Rear Adm. Mark Montgomery, an analyst at the Foundation for Defense of Democracies, also acknowledged Beijing’s infrastructure speed, noting that China accomplished in a decade what took the United States 25 years following the 1973 oil crisis. Jonathan Czin, a former senior CIA analyst now at the Brookings Institution, added that Beijing views its market handling as a clear vindication of Xi’s focus on self-reliance.

Despite that cushion, geopolitical strains continue to threaten energy infrastructure. Iran-backed militia attacks this month forced Saudi Arabia to temporarily shut a vital pipeline transporting crude across the kingdom to Red Sea ports. Meanwhile, Yemen-based Houthi rebels have seized two strategic islands in the southern Red Sea, increasing threats to maritime shipping lanes. Gulf nation talks aimed at reopening the Strait of Hormuz were put on hold earlier this week.

Market watchers remain cautious as U.S. President Donald Trump prepares to meet with Gulf Cooperation Council leaders in New York on the sidelines of the United Nations General Assembly. That delegation includes Saudi Arabia, the United Arab Emirates, Qatar, Oman, Kuwait, and Bahrain.

Bank of America analysts projected last week that oil would average $83 a barrel for the second half of the year assuming persistent disruptions in the Strait of Hormuz, though they anticipated shipping would gradually recover. However, analysts warned that escalating violence could push prices between $95 and $120 a barrel, while direct damage to major energy infrastructure could trigger price spikes reaching $150 a barrel.