China’s Reduced Oil Imports Have Helped Keep Prices In Check, But That Won’t Last Much Longer: Analysts

China’s reduced oil imports have helped keep prices in check, but that won’t last much longer, according to analysts cited in a new report.

China accounts for about three quarters of all global crude imports, helping prices remain relatively stable, JPMorgan analysts said, according to CNBC.

Concretely, Beijing has gone from importing 11.7 million barrels a day to under 9 in late may, the outlet added.

Societe Generale added that China’s reduced imports and other factors, including strategic inventory releases, signals from Washington and increased output from other countries like Brazil and Venezuela, have helped stave off a crisis like that of 1973.

But China “represents one of the largest offsets to the shock, second only to Saudi rerouting flows and larger than coordinated SPR releases from the U.S., Europe, and Japan,” the analysts said.

However, oil executives have also been warning the Trump administration that oil prices will likely surge in the next weeks as inventories continue to decrease with the Strait of Hormuz closed.

Politico detailed last week that the warnings came as data showed that fuel makers were largely relying on oil and fuel from storage tanks to replace products no longer arriving.

One industry executive told the outlet that inventories are at “dangerously low levels” and that they have “shared those concerns at the highest levels of government about what’s coming in mid-to-late June.” “You’re hitting tank bottom.”

A White House official, however, rejected such scenarios have taken place. “Politico’s anonymous sources are wrong,” the official said.

Regardless, public warnings abound. Strategists who spoke to The Washington Post noted that even if the key waterway is quickly reopened, U.S. consumers will still face high fuel prices due to low inventories.

“These shock absorbers have been surprisingly effective,” said Jim Burkhard, global head of crude oil research at S&P Global Energy.

Similarly, JPMorgan analysts said their base case scenario should the Hormuz Strait reopen in June would maintain Brent crude prices around $100 for the rest of the year. If it lasts longer, prices will increase $5 more in the third quarter and reach $115 in the last one of the year.

Analysts from Fitch, in turn, claimed that prices would plummet to about $70 in July in such a scenario, claiming that the spike is a “temporary logistical supply shock.”