After the war in Iran cut off a fifth of the world’s oil supply, oil prices jumped, at one point reaching nearly $120 a barrel. But they didn’t spike higher, even though some analysts warned ominously of $200 oil, and prices have since come down.
At more than $80 a barrel, oil is expensive. But it could be a lot higher.
One major reason was China.
The biggest oil buyer in the world, China has kept a lid on prices by rapidly reducing the amount of oil it imports. Before the war began, China imported an average of 11.6 million barrels per day. By May, its purchases of overseas oil had plunged to below eight million barrels a day, its lowest point in over eight years, according to customs data released by Beijing.
While oil prices hit three-month low on Monday as the United States and Iran said they reached a framework agreement for ending the war, analysts said China will still hold considerable sway over the global market.
“The reduction in Chinese oil imports is one of the most important reasons oil prices are not going through the roof right now,” said Jason Bordoff, the founding director of the Center on Global Energy Policy at Columbia University.
The world has lost more than 14 million barrels per day since the United States and Israel began a joint military campaign against Iran on Feb. 28, prompting Iran to shut the Strait of Hormuz and create the worst oil supply shock in modern history.
