How China Could Veto $100 Oil
livemint.comDrivers are starting to feel the pain at the pump again as oil moves closer to $100 a barrel. Supply cuts from Saudi Arabia and Russia could push global oil prices higher still. But China, the world’s top crude importer, will have a say too.
And while Chinese growth appears to have improved modestly in August, there are still two key reasons markets might be overestimating the likely extent of Chinese demand, and its impact on global benchmarks such as Brent oil in late 2023. First, China has moved aggressively into discounted Russian oil in recent months. Second, Chinese crude oil imports still appear to be running well ahead of fundamental demand—and its exports of refined products, particularly diesel, are rising sharply.
China has, from the beginning of Ukraine war, made it clear it considers Western sanctions on Russia to be illegitimate—and continues to import large quantities of Russian oil. But since December 2022, when the U.S. and Europe agreed to enforce a cap on Russian oil prices by leveraging their control of the global shipping insurance business, Chinese purchases have skyrocketed.
Total Chinese crude imports were the second highest on record in August, according to figures from data provider CEIC. But excluding imports from Russia, they were only up about 2% from December 2022 levels. Imports from Russia were up about 60% over that same period, and are now over 30% larger than those from Saudi Arabia, China’s number two supplier.
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