Chinese Oil Demand Unexpectedly Soars, Sending Shanghai Crude Above $100, With Brent Prices Set To Follow
Chinese Oil Demand Unexpectedly Soars, Sending Shanghai Crude Above $100, With Brent Prices Set To Follow One of the reasons why the price of oil failed to soar during the "actively kinetic" phase of the Iran war, when shipments through Hormuz were effectively halted and the world faced...
Chinese Demand Rebounds
Shanghai‑bound crude has surged past the $100‑per‑barrel mark, a stark reversal from the weak‑demand phase that kept oil prices muted during the “actively kinetic” stage of the Iran war. The earlier shortage of roughly 10‑15 million barrels per day, caused by the effective shutdown of Hormuz shipments, did not translate into higher prices because Chinese oil purchases had collapsed. Recent activity, however, shows Chinese refiners aggressively bidding for supplies, lifting Shanghai crude to a level just below its peak since the Iran conflict and creating a sizable premium over Brent.
Premiums on Asian Crudes
The Brent‑Shanghai spread, which fell to as low as –$20 in late April, has now flipped, with Shanghai crude trading well above Brent. Bloomberg reports that China, the world’s largest oil importer, is outbidding rivals for barrels from Africa, Canada and Latin America as disruptions at the Hormuz chokepoint and limited Iranian output tighten the market for alternatives. Smaller Chinese refineries that previously depended on heavily discounted Iranian oil shut down months ago when domestic demand fell; they now feel pressure as the market tightens.
Congo’s Djeno crude fetched premiums of up to $20 a barrel over ICE Brent this week, up from about $15 a few weeks earlier, according to unnamed traders. Chinese buyers are also securing tanker loads from Canada, Brazil and Argentina, while demand for Russia’s ESPO crude has risen and Dubai futures are being pushed toward $100 a barrel.
Market Reactions
Bloomberg notes that the import rebound coincides with improving refinery economics and rebuilding inventories in China. Better processing margins, the restart of fuel exports and commercial restocking are prompting refiners to increase purchases, according to GL Consulting founder Liao Na. Liao said, “China's robust buying lately is largely driven by refiners taking advantage of decent margins,” adding, “Active restocking by commercial players has also helped, but it’s not necessarily a sign of stronger underlying demand that’s supporting the recovery.”
Analyst Views
Goldman Sachs energy specialist Daan Struyven cautioned that China’s price‑sensitive buying could temper any sharp spikes, yet warned that Brent could rally to as much as $120 a barrel if Middle‑East shipping attacks intensify. He told Bloomberg TV, “Events over the last few days do suggest that the risk of shipping disruptions broadening and intensifying is an important one.” Struyven also advised investors to hedge geopolitical risk, stating, “While we see meaningful upside to crude oil prices, we do recommend to investors to hedge geopolitical risks by going long in global natural gas and refined‑oil products,” and concluding, “The supply shocks are bigger than in the crude market.”
Source: zerohedge.com · 2026-09-07