China's Massive Oil Reserves Helped Temper Global Crude Price Surge

In a research note earlier this month, analysts at Societe Generale said a 7 percent reduction in global crude supply during the 1973 Arab oil embargo resulted in a 134 percent increase in oil prices.

China's strategic and commercial oil reserves have emerged as a key factor in moderating global crude prices amid supply concerns. (Photo: China Media Croup)

However, prices have not risen nearly as sharply during the conflict involving Iran, despite disruptions affecting about 14 percent of global supply, Stephanie Yang reported in an analysis for CNN.

The analysts attributed much of the difference to China, describing the country as "the invisible hand that is rebalancing the market" because of its ability to reduce oil imports by roughly 3 million barrels per day—an amount nearly equal to Japan's total crude demand.

China has been able to significantly reduce consumption for several reasons. Before the conflict, the country was building crude oil inventories with the help of discounted shipments of sanctioned oil from Russia and Iran, according to Janiv Shah, vice president of oil markets at Rystad Energy.

Analysts said China now holds more than 1 billion barrels of oil in its commercial and strategic reserves and began drawing on those supplies in May.