Not Middle East, Not Russia, China May Control Global Oil Market. Here’s How

For decades, the global oil market has taken its cues from the Middle East.

Wars, sanctions, OPEC (Organization of the Petroleum Exporting Countries) decisions and geopolitical flashpoints have often dictated where crude prices move next. Even Russia emerged as a dominant force after the Ukraine conflict reshaped energy trade routes.

But the latest oil crisis, triggered by the Iran war, revealed something unexpected. The country exerting perhaps the greatest influence on the market was not sitting at any negotiating table.

It was China.

As Washington and Tehran work out the details of a lasting agreement to reopen the Strait of Hormuz and restore normal crude flows, analysts are increasingly pointing to Beijing as the player that could determine the next phase of the oil cycle.

The reason is simple. China has become both the world’s largest swing buyer and, increasingly, the world’s largest swing absorber of energy.

The Crisis That Should Have Sent Oil Soaring

The closure and disruption around the Strait of Hormuz removed access to more than 11 million barrels of oil per day at the height of the conflict. Nearly a fifth of global crude flows were affected.

Historically, such a shock would have triggered a dramatic price surge.

During the 1973 Arab oil embargo, a supply disruption affecting roughly 7-8 per cent of global oil supply led to prices soaring more than 130 per cent.

This time, despite a much larger disruption, oil prices rose but stopped well short of the doomsday forecasts that had predicted a march towards $200 a barrel.

According to Sourav Mitra, Partner – Oil & Gas at Grant Thornton Bharat, the answer lies in Beijing’s long-term preparation rather than emergency action.

“As the US-Iran war choked the Strait of Hormuz and stripped away nearly 20 per cent of global crude supply, the world expected a much sharper shock,” Mitra said. “The reason the impact remained relatively subdued was a quiet recalibration by China.”

China Simply Bought Less

That recalibration was years in the making.

China entered the crisis with one of the world’s largest crude stockpiles after years of buying discounted oil from Russia and Iran. Estimates suggest the country now holds more than a billion barrels across strategic and commercial reserves.

When supplies tightened, Beijing did not need to rush into the market. Instead, Chinese refiners drew from inventories.

China also reduced crude imports significantly. Analysts estimate that imports fell by nearly 3 million barrels per day during the crisis period.

That volume is substantial enough to influence global balances. “China simply bought less,” Mitra noted. “It had the ability to reduce imports by a massive three million barrels per day, releasing crude back into the market when it was most needed.”

The impact was immediate.

A major source of demand disappeared precisely when global supply was under pressure. That helped prevent an even sharper rally in oil prices.

Stockpiles, EVs & Weaker Refinery Demand

China’s influence extends beyond strategic reserves.

The country’s aggressive push towards electric mobility has begun reducing oil demand at a scale few nations can match.

Nearly half of all new passenger vehicles sold in China are now electric or hybrid models. According to estimates from the International Energy Agency, China’s EV fleet alone displaced roughly one million barrels of oil demand per day last year.

At the same time, Beijing tightened fuel export quotas and refiners cut processing rates, reducing the need for additional crude purchases.

Together, these factors created what many analysts describe as an “invisible hand” in the market. Instead of competing aggressively for scarce barrels, China stepped back.

The result was a much-needed demand cushion for the rest of the world, including India.

Why China Could Soon Become The Biggest Buyer Again

The story, however, may be about to change. The same stockpiles that helped stabilise the market have been drawn down.

Those inventories will eventually need replenishment. That is where China’s next move becomes critical.

“If prices soften further, China will likely return as a significant buyer,” Mitra said. “The flexibility cuts both ways. Reserves drawn down during the crisis must eventually be refilled.”

This could become particularly important if the Strait of Hormuz fully reopens and Middle Eastern production normalises. The International Energy Agency has already warned that the market could swing from fears of shortage to concerns about oversupply in 2027.

Additional barrels from the Gulf, combined with a possible increase in Iranian exports, could flood the market. Yet whether that oversupply materialises may depend heavily on China’s appetite.

If Beijing decides to rebuild reserves aggressively, a large portion of those excess barrels could quickly find a home. If it chooses not to, crude prices could face sustained downward pressure.

What It Means For India

For India, the developments offer both relief and a lesson.

Softer crude prices have helped cushion import costs during a period of geopolitical uncertainty. Some of that stability, analysts argue, can be traced back to China’s reduced buying activity.

However, Mitra believes India should focus on strengthening its own energy resilience. “India has diversified suppliers and built credible reserve capacity with real skill,” he said. “The gap worth closing is one of scale.”

According to Mitra, strategic reserves measured in weeks rather than months leave countries reacting to decisions made elsewhere rather than shaping outcomes themselves.

The New Oil Superpower?

The oil market is entering unfamiliar territory. For decades, traders watched Riyadh, Moscow and Washington for signals.

Today, they may need to pay just as much attention to Beijing. China’s ability to cut imports, draw from enormous reserves, accelerate electrification and then re-enter the market as a major buyer gives it an influence few countries possess.

The next big move in oil may not come from a tanker leaving the Persian Gulf. It may come from a purchasing decision made in Beijing.