China and its crude oil buying behavior in the spring and summer have stabilized global oil markets as Beijing, not OPEC, is calling the shots now, according to Igor Sechin, chief executive of Russia’s biggest oil producer Rosneft.
China has strengthened its position of the ultimate swing buyer on the global market and has taken the initiative from OPEC, said the executive, who is considered to be a close ally of Vladimir Putin and who has been a long-time critic of OPEC.
“China has successfully turned from a major consumer and importer into an active market leader,” Sechin said at an economic forum in Vladivostok in Russia’s Far East.
“China took the initiative out from OPEC this year and without joining any cartels, it has managed to stabilize the global market by slashing its crude oil imports by about 5.5 million barrels per day (bpd),” Russia’s top oil executive said.
Arguably, the biggest cushion the market has had this summer was China’s crude oil import behavior. The world’s largest crude oil importer had amassed an estimated up to 1.4 billion barrels of crude in commercial and strategic stockpiles before the Iran war. The huge cushion allowed it to slash imports when the Strait of Hormuz closed, and prices spiked.
Ever the opportunistic buyer, China withdrew from the spot market amid the Middle East crisis, and by slashing this import demand, Beijing single-handedly offset part of the lost supply.
The market appeared to have underestimated China’s ability to be as flexible in its crude oil imports as to slash purchases by as much as 40% in June compared to pre-war levels.
In addition, during the crisis, China has also seen soaring EV use, a massive switch to coal, and rising shares of power generation from renewable energy sources.
“I believe that further growth of the strategic and commercial reserves will strengthen China’s role in the energy market, amid OPEC’s fading influence a shrinking number of members,” Sechin said.
Earlier this year, the United Arab Emirates (UAE), one of the cartel’s biggest producers, quit OPEC effective May 1 to pursue its national interests.
By Charles Kennedy for Oilprice.com
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