Rising imports of oil by China pose another risk to the price of crude

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Photo by CN-STR/AFP via Getty ImagesChina could once again wield its hand in the crude oil market after the world’s largest importer of the fossil fuel helped keep prices from rising more than they did, say oil market analysts.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an Account“The biggest, most important factor that had helped oil markets balance at the peak of the supply loss in March, April and May was China’s dramatic pullback in crude buying,” Rory Johnston, founder of oil market research company Commodity Context, said. “Now that it’s returning, you’re going to further tighten those balances.”Following the start of the war on Iran and the resulting throttling of 20 per cent of the world’s oil supplies through the Strait of Hormuz, China’s oil imports plummeted to 29 million tonnes at the end of June from a high in 2026 of 50 million tonnes in March, according to Bloomberg data. Its imports have since rebounded to just under 40 million tonnes at the end of August.“China is an important part of the story,” Marc Ercolao, an economist at Toronto-Dominion Bank, said in a report in early August, referring to steps taken by the world’s second-largest economy to cut back crude oil imports by an amount equal to approximately five per cent of global demand, helping to “offset some supply pressures over the past year.”But China is ramping up imports again at a time when tanker crossings dropped to one on Monday from 80 a day prior due to the renewed eruption of the conflict between the United States and Iran, according to data from Bloomberg based on ship transponders.Ercolao said China’s increases in imports will put more “upward pressure” on oil prices if they continue.However, he said the geopolitical turmoil, including the absence of a peace deal between the U.S. and Iran and the recent attack on Saudi Arabia’s energy infrastructure by the Houthis, who are based in Yemen, is still more important.“Those are the biggest factors that are driving the risk premium right now,” he said. “China is more of a secondary, but very important, story.”China has increased its crude oil imports for two months following a trough in June, which Johnston said is not enough to speak to a “durable recovery in demand.”However, he said China is buying oil at market prices because, in addition to it drawing down its commercial crude oil reserves, the current pace of supply of refined oil products — such as diesel — is not inherently sustainable.“As that begins to dwindle, they will be forced to go back into the global market for crude,” he said.Ercolao said China isan emerging factor, especially since a lot of people underestimated the impact that reduced Chinese imports would have on helping to lower prices.“Now that there’s some evidence that they’re durably purchasing oil again, it is hitting people’s radars that, ‘OK, we have this potential big source of demand coming through,'” he said.We apologize, but this video has failed to load.This advertisement has not loaded yet.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. 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