China, wary of global unrest, is keeping the oil market afloat

Subscribe to enjoy similar stories. President Donald Trump’s control of Venezuela’s oil supply increases U.S. influence in the world oil market, but China is the major power that has been keeping prices steady.

The U.S. incursion into Venezuela and Trump’s declaration that the U.S. now runs the country and its oil highlight the complicated relationship between the U.S.—the world’s largest oil producer—and China, the biggest importer.

Oil prices have fallen during the past three years, and may continue to do so if there is no political disruption to supplies. The oil market is oversupplied by as much as 500,000 barrels to well over two million barrels a day this year, depending on who you ask. But the one thing analysts agree on is that China has been an opportunistic buyer.

It has been a major force keeping prices from cratering. The Chinese buy when prices are low because “they know they are vulnerable" said John Kilduff, partner with Again Capital. China needs to import oil to meet its needs.

“They just put it in storage and hold onto it," he said. China has strategic reserves, much like the U.S. stockpile, which can help with supply disruptions and tensions with the U.S., including Beijing’s ambitions to control Taiwan.

Traders are currently watching protests in Iran and a U.S. threat to intervene in case that unrest should disrupt Iran’s oil exports. China’s purchases last year prevented a price collapse.

U.S. oil production hit record levels, while OPEC+ returned oil to the market. China bought extra barrels as prices weakened.