China saved the oil market

XBR/USD

Key zone: 103.50 - 105.50

Buy: 106.50 (on a pullback after retesting 105.00); target 108.50-110.00; StopLoss 105.50

Sell: 102.50 (on strong negative fundamentals); target 100.00; StopLoss 103.50

Beijing contained the global oil shock by cutting imports and drawing on its enormous stockpiles. Now purchases are recovering, while Brent has returned above $100. If the world’s largest oil importer returns to the market at full strength, the balance will tighten rapidly, opening the way to $120.

In the first months of the war in the Middle East, the market was preparing for a classic oil shock: a decline in exports from the Persian Gulf was expected to collide with virtually unchanged global demand and send Brent to $150–200 per barrel.

But something happened that the most aggressive forecasts had failed to take into account.

A reminder:

The world’s largest oil importer sharply reduced its purchases. China effectively acted as an “OPEC on the demand side”: instead of competing for scarce Middle Eastern barrels, Beijing cut imports and allowed refiners to use previously accumulated inventories. As a result, millions of barrels per day temporarily disappeared from global demand.

The China factor was one of the reasons why the oil shock proved significantly weaker than initially expected.

The scale of China’s adjustment was enormous.

In 2025, China imported a record 11.6 million bpd. In Q2 2026, average imports plunged to 8.1 million bpd, down 32% from the previous quarter. In May and June, shipments fell below 8 million bpd for the first time since 2016. In June, imports reached approximately 7.12 million bpd, nearly a decade low. Comparing June–July with the average level during the three months before the war began, the difference amounts to around 4.2 million bpd.

For the global oil market, this is an enormous volume. That is why the initial forecasts of Brent at $150–200 failed to materialize.

China had been preparing for such a crisis long before the war began. According to the EIA, throughout 2025 the country directed an average of around 1.1 million bpd into strategic stockpiles. By December, strategic inventories were estimated at nearly 1.4 billion barrels.

For comparison, the U.S. Strategic Petroleum Reserve contained around 413 million barrels in December 2025, while more than another 400 million barrels were held in U.S. commercial inventories. Beijing effectively used the low prices of 2025 to insure against future geopolitical risk. While Brent was falling, China bought more oil than current refining demand required and accumulated physical inventories.

When Hormuz became partially blocked, this strategy paid off. Instead of buying expensive oil at any price, Chinese refineries were able to use accumulated barrels. And this is fundamentally important: China did not destroy oil demand — it shifted it through time.

Today, China’s energy strategy relies on several layers of protection at once:

• enormous strategic and commercial oil inventories;
• pipeline supplies from Russia and Central Asia;
• the world’s largest electric vehicle fleet;
• its own oil production;
• enormous coal-fired power generation;
• enormous coal-fired power generation;

This does not make China independent of imported oil. But it allows Beijing to withstand an energy shock significantly longer than other major importers.

So, What Does This Mean?

The situation is becoming much more bullish, and the market is already reacting. After several months of relative resilience, Brent broke above $100 again on September 9. On September 11, prices climbed above $107 amid renewed escalation in the Persian Gulf.

Meanwhile, Chinese imports are rising for the second consecutive month. China is turning from a stabilizer into a source of scarcity.

During the first phase of the crisis, the logic of the oil market looked roughly like this:

war → decline in supply → reduction in Chinese imports → partial offset of the shortage.

Now a different structure is taking shape:

war → constrained supply → recovery in Chinese imports → intensification of the physical shortage.

Therefore, the main risk for Q4 is not a further decline in Chinese imports, but their normalization. If China returns even to 10–11 million bpd while the Middle East fails to restore lost volumes, the market will face rising demand and constrained supply simultaneously.

In that case, $120 Brent ceases to be an extreme forecast and becomes a viable bullish scenario.

So we act wisely and avoid unnecessary risks.

Profits to y’all!