How China and the U.S. Cushioned the Biggest Oil Supply Shock in History
CNBC reported Friday that China and the United States have jointly absorbed the worst oil supply disruption on record, preventing energy prices from climbing even further than they already have.
Iran’s blockade of the Strait of Hormuz has stripped roughly 10 million barrels per day from global markets. That figure represents around 10% of worldwide daily consumption, according to the International Energy Agency. Despite the scale of the disruption, Brent crude closed just above $100 per barrel on Thursday. That is notably lower than prices recorded during comparatively smaller shocks, including the supply crunch that followed Russia’s 2022 invasion of Ukraine.
The Two-Sided Market Response
The IEA’s latest assessment shows non-Gulf producers, led by the United States, have ramped up exports by 3.5 million barrels per day since the conflict began. Simultaneously, China has cut its own crude imports by roughly 3.6 million barrels per day. That reduction alone is comparable to Japan’s entire daily consumption. Combined, the two moves account for around 70% of the volumes lost from Persian Gulf exports. Japan, South Korea, and India have together trimmed an additional 3.6 million barrels per day in imports.
Deutsche Bank analyst Michael Hsueh told clients on Tuesday that both countries are providing crucial market adjustment. Without their actions, Brent would likely have surpassed $120 per barrel, he argued. Martijn Rats, commodities strategist at Morgan Stanley, called China’s import reduction the single most important factor keeping a lid on prices.
Background: A Historic Disruption Meets Diplomatic Pressure
The Hormuz blockade is unprecedented in scale. Previous supply shocks never came close to removing 10 million barrels per day from the market simultaneously. Against that backdrop, Presidents Donald Trump and Xi Jinping met in Beijing this week and agreed the strait must reopen to safeguard the free flow of energy, according to a White House statement. The timeline for a return to normal commercial shipping levels remains unclear.
Energy Secretary Chris Wright told CNBC on Friday from Port Arthur, Texas, that China is expected to increase its oil purchases from the United States over time, describing the arrangement as a natural trade relationship given American production capacity and Chinese import demand.
Inventories Are the Next Test
The durability of this two-sided response is now the central question. China holds an estimated 1.4 billion barrels in strategic reserves, according to the U.S. Energy Information Administration, giving Beijing months of flexibility. U.S. inventories face greater strain. American export growth stems largely from drawing down stockpiles, including the strategic petroleum reserve, rather than lifting production. The reserve held 413 million barrels at year-end, and 172 million barrels were committed for deployment as of March.
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