Key facts
- Developing Asian countries are seeking to build strategic petroleum reserves.
- The Iran war has caused significant disruptions to global oil supply and demand.
- Global oil demand is down by approximately 4 million barrels per day since the war began.
- China has drastically reduced its oil imports and purchases of Iranian oil.
- Refineries are operating at maximum capacity, partly due to attacks during the conflict.
- Discounted oil from the Middle East is struggling to find buyers.
Developing nations in Asia, including the Philippines, are intensifying efforts to establish strategic petroleum reserves as they grapple with escalating fuel costs and the persistent supply chain disruptions caused by the ongoing war involving Iran. The global oil market is experiencing a complex interplay of broken supply and demand dynamics.
Supply remains volatile, with a recent glut of crude oil quickly followed by a severe supply shock. The escalating conflict has again restricted access to Persian Gulf oil, reintroducing chaos into the market. Despite this, global demand has surprisingly slumped. Over the past five months of war, the world has adapted to using less oil, and a significant volume of oil that recently exited the Strait of Hormuz has struggled to find buyers, leading to substantial price discounts for some Middle Eastern crude.
China, a major oil importer, has dramatically reduced its purchases, both of Iranian oil and overall crude imports. This decline in demand is attributed partly to the surge in electric vehicle adoption and restrictions placed on domestic refinery output. Consequently, global oil demand remains significantly lower than pre-war levels. Refineries, particularly those in the Middle East that were targeted during the conflict, are operating at maximum capacity, further complicating the market.