The Wall Street Journal reports:

A sharp fall in China’s crude oil imports during the Iran war has been instrumental in holding down oil prices and keeping the global economy humming.

Clues are emerging in the mystery of the missing three million barrels—the oil that China would normally be importing but isn’t now. Chinese people are driving fewer gasoline-powered cars and taking trains instead of planes. The country is dialing back operations at the plants that turn crude oil into feedstock for materials such as plastics. And Beijing is beginning to draw down reserves.

The question is how long the import cuts can last—and what would happen if China needs to start buying more again.

When the U.S. and Israel attacked Iran and the Strait of Hormuz was virtually closed, many analysts thought a prolonged closure could bring oil prices to $150 to $200 a barrel. That in turn was viewed as likely to trigger a global recession. Instead, with the strait chokehold well into its fourth month and clashes in the war continuing, the Brent crude benchmark is below $100 a barrel.

Actions by the world’s biggest oil producer—the U.S.—and its biggest importer—China—help explain this unexpected resilience. The U.S. increased crude oil exports in April and May to more than five million barrels a day, a jump from an average of about four million barrels a day in recent years. And China has cut its imports.

Chinese official customs data put crude imports at 7.8 million barrels a day in May, which includes oil arriving by pipeline from Russia, a drop from around 11 million barrels a day in recent years. The missing three million barrels are roughly equal to the combined daily oil consumption of Italy and France. [Continue reading…]