Oil prices in China have surged to record highs amid mounting disruptions to exports from the Middle East, as Beijing faces an increasingly difficult balancing act between securing its own energy supplies and preventing global oil prices from climbing even higher. Saudi Arabia has been forced to shut a key pipeline that had become an important route for getting oil to China and other Asian markets while disruption in the Strait of Hormuz restricted exports through the Gulf. The pipeline, which carries crude across the Arabian Peninsula to the Red Sea, was shut following attacks by an Iran-backed group in Iraq.
Its closure leaves two vital routes for Middle Eastern oil to China both disrupted in the midst of the US-Israel war on Iran and conflicts in the wider region. With access to Russian and Iranian crude also complicated by United States sanctions and other restrictions, Chinese refiners are being forced to search further afield for supplies. That scramble for available barrels is adding to pressure on oil prices, both in China and globally.
With China increasingly forced to compete for replacement supplies – risking pushing prices still higher – restoring oil flows through the Strait of Hormuz, which Iran has effectively blocked, has become a pressing economic and diplomatic priority for Beijing ahead of talks between Chinese President Xi Jinping and US President Donald Trump, say analysts. The meeting follows talks in Beijing on Wednesday between Chinese Foreign Minister Wang Yi and his Iranian counterpart, Abbas Araghchi. Before the war, China was importing roughly 12 million barrels of crude a day and producing another 4.4 million barrels domestically, reported.
It was buying more oil than its refineries needed, allowing Beijing to funnel some of the surplus into vast stockpiles that had grown to an estimated 1.4 billion barrels by the end of last year. That helped cushion the impact on the wider oil market. As the world’s largest crude importer, China’s decision to buy fewer barrels removed demand at precisely the moment global supplies were being squeezed.
Trita Parsi, executive vice president of the Quincy Institute for Responsible Statecraft, told Al Jazeera, “It lies in their interests that this conflict the United States started does not lead to a global recession.” “But that [China importing less oil] was not done to undermine the Iranians or help the Americans. The Chinese are pursuing their own interest, and their interest is that the rest of the world should not suffer economically, because if that happens it will backfire on China.” Crude imports averaged just 8.1 million barrels per day in the second quarter – almost 4 million barrels per day, or 32 percent, lower than in the first three months of the year, according to the US Energy Information Administration (EIA). But those buffers are now being eroded, and Ayoub said the turnaround was being driven in part by Beijing’s decision to ease restrictions on refined-fuel exports, which had helped keep refinery activity low earlier in the war.
As refiners process more crude and stockpiles are drawn down, China is being pushed back into the market for more barrels. Russian ESPO crude shipped from the country’s Pacific coast can reach Chinese ports in less than a week, while oil also flows overland through pipelines. Chinese refiners have consequently scrambled for available Russian barrels, snapping up September and October ESPO cargoes unusually quickly, experts say.
Extract — continue reading at the source.
