Analysts were wrong about sky-high oil prices, and they have China to thank for it

Key Points:

• Despite ongoing conflict and the closure of the Strait of Hormuz disrupting about 20% of global oil supply, oil prices have remained relatively stable around $94 a barrel, below last month's $104 per barrel.
• China's significant reduction in oil imports—from 11 million barrels per day to 7.8 million barrels in May—has cushioned the global oil market, accounting for 74% of the world's decrease in crude oil trade.
• Analysts highlight China as a key factor in rebalancing the oil market, but question how long China can sustain this role without tapping more into its strategic reserves or increasing crude purchases at higher costs.
• Historical context shows that despite a 14% loss in global crude supply due to the Strait closure, price increases have been moderate compared to the 1973 OPEC embargo, which had a smaller supply disruption but caused prices to soar over 130%.
• Other factors such as continued U.S. oil exports and greater-than-expected shipping through the Strait of Hormuz help stabilize prices, but analysts warn that prolonged conflict will likely push energy costs higher due to the need to rebuild reserves and incentivize new production.