The world has become used to being deceived by its major leaders. The words of Donald Trump informing that the new spate of attacks on Iranian targets might be repeated “anytime we want,” but the current campaign “won’t last too long,” might just lead to a reprieve in the price of Brent’s mad dash toward $100/barrel. The market-aware US President campaigned on lower oil prices and with evidence in the preceding 6 months of this attrition showing how a TACO emerges when such a weighty crude price is possible, our market might do well to believe that a spate of quietness will once again break out in the skies of Hormuz. 

The higher oil prices of late are a major factor in why there has been a global bond rout as inflation wanders across the consideration of every industry one might think of. If US missiles and planes stay grounded for a period of time, the very low level of ships reportedly passing through the pinch point of global concern will suddenly increase. Pulling the reins on military options might also be politically expedient for Republicans. According to Reuters, "top aides to US President Donald Trump are pushing to keep the Iran war from escalating before November’s midterm elections to staunch Republican electoral losses and allowing the fresh spate of sanctions to begin their bite."

The swing consumer

The current upswing oil in prices will once again bring into focus the role of China in being the keeper of ‘swing demand’. It is always incredibly awkward when tracking demand in the biggest importer on the planet. As S&P Global explains, Beijing does not publish actual oil consumption figures, so the market relies on "apparent demand," calculated as official refinery throughput plus net imports of refined products. According to official data, China's total apparent oil demand in the second quarter of 2026 fell 12 percent year-on-year to 153.47 million metric tons. 

We have long held a view, among a growing many, that it really does not matter how well or badly the economy might fare in China, its main driver for oil supply splurging is price. Given Brent’s year-to-date high print in futures at $126.41/barrel at the end of April, and how long it takes for adjustments to be recognised or filter through, it came as no surprise when China’s crude imports fell to 7.12mbpd in June, a decade low. The convening dip in crude prices following the initial relief entertained by our community due to the memorandum of understanding seems to have once again brought opportune buying as imports increased to 8.41mbpd in July. There must be some sort of compensation for this reduction in feedstock imports, and it comes from products. Beijing’s insistence on energy security borders on paranoia and to protect its domestic supply, there was a ban introduced in March on petroleum product exports including gasoline, diesel and jet fuel. 

Even though July’s crude imports improved, they are 3mbpd lower than from a year earlier and when married with the then freeze on refiners’ ability to send oil derivatives into the world, much of the soaring crack values across the barrel witnessed this year are attributable to the behaviour of China. It is interesting to note a recent report on Reuters, with data from Chinese consultants who track the sector, refiners are expected to export slightly more than 4 million metric tons of gasoline, diesel and jet fuel in September. Such a relaxation by the government toward refinery activity can be viewed as giving a reward for the previous constricted times but also shows the continued national savvy surround oil prices. Unleashing the incredible capacity of China’s refiners would ordinarily crush margin, but with Russia increasingly unable to process crude because of the damage wreaked by Ukrainian drones, its fuel exports are predicted to fall 27.3 million tons this year to 98.5 million tons, 24.1 million tons below its previous forecast. The increased finished products that China plans to float into the world will still have more than willing buyers who used to be fulfilled with Russian fuels.

During the temperance period of this year when crude imports fell to 10-year lows, it is safe to assume China ran down some of its vast 1.2-billion-barrel SPR as and when domestic refiners needed it. If China keeps security as a priority, even at today’s lofty levels for crude grades, there might be a reluctance to keep drawing on its prized asset. Refinery margin is so high as to offset the crude prices being paid, but our market might see a little keener interest from China as it seeks to supply both its refiners and to replace the rundown of inventory. Again, it is an opportune moment for Beijing. It has the best relationship in its history with Moscow and there once again will be an equitable solution for each country’s current oil issues. Creating petrodollars for Russia must now lean upon crude exports alone, China will be more than willing to mop up the likely discounted feedstock being offered by its ally of convenience. 

According to Bloomberg sources, the Asian powerhouse is set to raise its crude imports by 1.2mbpd going into the last quarter of the year taking it back to toward the 10mbpd which had become the usual standard. If China in some part created the current wide differential between oil product prices and crude, it is not beyond logic to assume with its current activity in the marketplace that crack values might see some pressure. Howsoever China’s influence is expressed in prices, be they crude or finished fuel, it augments the power it has in the oil space and really does confirm its ‘swing consumer’ status.

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