China’s major stake in crude markets could be a soothing factor amid geopolitical tensions, oil expert Paul Sankey suggested in an interview with CNBC.
“It’s interesting that the Venezuelan threats against Guyana go nowhere, the Iranian threats just peter out,” the Sankey Research founder said. “And I think a big part of that is China standing behind the curtain and going, you know, can you please not interrupt our oil supply? We don’t need a problem right here because we ourselves have our own issues.”
After all, the country is the world’s biggest crude buyer, and a crucial customer of producers sanctioned by the West. That includes Russia and Iran, with whom China has effectively created an alternative oil market, the Atlantic Council said in March.
China’s heavy buying of Tehran’s crude is how Sankey explained the oil market’s muted response after tensions flared up between Iran and Israel this weekend: Brent crude, the international benchmark, actually declined under $90 a barrel through Monday.
“I think the big thing behind all of this is Iran’s supply of oil to China. You know, I think that the oil going east is what’s key,” he said.
According to Reuters, small Chinese refineries take on 90% of Iran’s total oil exports.
Echoing a post-weekend analysis from JPMorgan, Sankey agreed that it’s not any countries interest to pursue deeper hostilities, and expects some form of sanctions to be applied on Tehran instead.
This already appears underway, with the US House of Representatives voting on whether to expand secondary sanctions against Iran on Monday, Bloomberg reported. The legislation would also target the crude trade Iran has with China.
Meanwhile, tensions between Venezuela and Guyana appear to be ongoing, though few major developments have occurred in the past months. The conflict between the two oil producers emerged in late 2023, when Caracas announced it would annex an oil-rich region belonging to Guyana.
