Oil flows from the Persian Gulf ramped up following an interim peace agreement between the US and Iran last month, but a recent escalation of hostilities in the region has snarled Hormuz traffic. Threats by Iran-backed Houthi militants to shipping in the Red Sea have also heightened risks to Saudi crude supply.
Higher inflows in July are “largely because cargoes that had been stranded in the Persian Gulf finally arrived in China,” said Muyu Xu, a senior crude analyst at Kpler based in Singapore. “Whether this marks a bottom in imports will depend on shipping conditions in the coming weeks.”
Shipments from Saudi Arabia have more than doubled in July, while flows from the United Arab Emirates have surged more than tenfold, according to data from Kpler. Russian inflows have climbed by about 10%.In February, prior to the broad escalation of the Iran war, China’s overall crude imports reached about 12.6 million barrels a day, customs figures show. That includes pipeline flows, which can be as much as 1 million barrels a day.
“China’s crude imports are now the market’s key price-sensitive variable,” said Liao Na, founder of Guangzhou-based GL Consulting. “While the country’s crude demand is recovering, the pace remains relatively modest, constrained by slowing economic growth and government policies aimed at accelerating electrification and reducing reliance on oil.”
Since the Iran war started in late February, China has cut its crude deliveries by over 5 million barrels a day and reduced refining — efforts that have helped to prevent a spike in global oil prices. The market is keenly watching for any rebound in buying, along with a resumption of stockpiling.
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