China Demand Lifts Oil Past $102 Amid Conflict
US crude closes at $102, a record high since May, as Chinese importers resume buying amid escalating Middle East tensions.
U.S. crude oil prices closed at $102 per barrel on Thursday. This is the highest level since May. The contract rose approximately 50 percent from its summer low of $68.55. The price jump coincides with renewed fighting in the Middle East. Saudi Arabia’s East-West pipeline has been shut down after multiple attacks.
China now determines whether prices hold these gains. Analysts say the market has priced in regional conflict but not full demand recovery. Chinese refiners are increasing crude purchases to capitalize on high diesel margins. This shift is tightening global supply significantly.
Chinese Imports Rebound From Wartime Lows
China cut crude imports by 3 to 5 million barrels per day during the peak of the Iran conflict. It relied on a petroleum reserve of over 1 billion barrels. This strategy kept global prices below the April 7 high of $112.95. Data from Kpler shows imports fell to 6 million barrels per day in June. That was a 50 percent drop from February levels. Imports have since risen to roughly 7 million barrels per day in July and August.
Matt Smith of Kpler expects buying to remain near current levels. He notes that Beijing prefers using inventories over paying triple-digit prices. However, the trend is upward as refiners restart operations. This creates a steady bid on crude supply.
Refining Margins Drive Market Participation
Diesel production margins have surged due to lost refining capacity in Iran and Ukraine. Rebecca Babin of CIBC Private Wealth states that refiners cannot ignore these profits. They are buying crude to process and sell high-margin products. This activity directly tightens the physical market. The risk premium has rebuilt since the U.S. reimposed a naval blockade of Iran in July.
Global Stockpiles Erode Price Buffer
Global inventories have fallen by 400 million barrels over six months of war. The U.S. Energy Information Administration confirms this data. Emergency stockpile releases are nearing completion. Bob McNally of Rapidan Energy observes that market optimism is fading. Verbal efforts to lower prices are losing effectiveness. The buffer that prevented earlier price spikes is gone.
The source GN auto markets/energy: crude oil prices tracks these developments. The combination of high Chinese demand and low inventories supports higher prices. Traders expect volatility to remain elevated. The path to pre-war price levels is currently blocked by structural supply constraints.
