Key facts
- China's strategic petroleum reserves are estimated between 1.1 and 1.4 billion barrels.
- These reserves can cover approximately 109 to 120 days of the country's seaborne oil imports.
- China has diversified its energy sources and is pursuing electrification.
- The country acquired discounted oil from Iran and Russia, leveraging sanctions.
- Recent estimates suggest global oil supply losses due to Strait of Hormuz disruptions may be smaller than initially reported.
China's substantial strategic petroleum reserves are shielding it from the global oil supply disruptions stemming from tensions around the Strait of Hormuz. With an estimated 1.1 to 1.4 billion barrels in reserve, the country can cover approximately 109 to 120 days of its seaborne oil imports. This strategic foresight has allowed China to acquire discounted oil from sanctioned nations like Iran and Russia, effectively hedging against price volatility.
While initial estimates of oil supply lost due to the Strait of Hormuz closure were high, some traders now suggest actual losses are significantly smaller, between 5 to 6 million barrels daily, due to alternative logistics and workarounds. A notable decline in China's crude oil consumption in May has also contributed to keeping prices under control, indicating demand destruction in the world's largest oil importer.
However, global crude oil inventory levels remain a point of concern, with warnings from energy executives about diminishing buffers and the potential for price increases as inventories fall. The world has adapted to the supply shock through various means, including fuel sales caps, price hikes, subsidies, and increased reliance on U.S. crude, though this has led to draws from U.S. inventories. The ongoing debate over supply loss numbers and potential diplomatic resolutions could further influence market sentiment.