China takes over from OPEC+ as key balancer of global crude oil market

OPEC+ influence over the global crude oil market has weakened sharply due to the Iran war and restrictions on exports through the Strait of Hormuz. The alliance’s share of global crude oil production fell to around 40% in July from more than 48% before the conflict began, according to Reuters calculations based on IEA data.

Supply disruptions have effectively reduced OPEC+’s ability to quickly balance the market by adjusting crude oil production. Since March, the alliance’s key members have announced six output increases, but export constraints through Hormuz have left much of this additional supply on paper, with little impact on crude oil prices.

Instead, China is playing an increasingly important role in balancing the global market. Since the war began, the country has purchased roughly 400 mln fewer barrels of crude oil than during the same period last year. The decline in Chinese imports has partially offset the loss of Middle Eastern supplies and helped limit the rise in global prices.

China’s lower purchases are linked to reduced refinery runs, restrictions on fuel exports and the continued electrification of road and other transport. As a result, analysts increasingly describe China as a new swing demand centre capable of significantly influencing the global crude oil balance.

The dynamics of the crude oil market are therefore changing. While traders previously focused primarily on how much crude oil OPEC+ decided to produce, attention is now shifting toward how much its members can physically export and the scale of Chinese demand. China’s future buying patterns could remain one of the key factors shaping global crude oil prices.