China has re-entered the oil market, increasing its crude purchases after a period of reduced imports that followed the outbreak of the Iran war. This renewed buying comes as hostilities escalate in the Strait of Hormuz, a critical chokepoint for global oil shipments, which has contributed to upward pressure on oil prices [1]. Chinese oil imports had previously dropped to an eight-year low, helping to cushion the initial price shock, but have since rebounded, though they remain below prewar levels [1]. Market participants note that China's move to rebuild its strategic reserves is coinciding with Brent crude surpassing $100 per barrel, fueling global inflation concerns [1]. Technical analysts see Brent’s move above $100 as a bullish signal, with support expected in the $95 to $100 range and resistance near $105, as long as geopolitical tensions persist [1].
Meanwhile, West Texas Intermediate (WTI) crude is trading around $98.50, having risen over 10.25% for the week—the highest weekly gain since May—before experiencing a pullback due to profit-taking and technical overbought conditions [2]. US crude inventories fell by 391,000 barrels for the week ending September 4, less than the expected 1.6 million barrel draw, and significantly below the previous week's 4.45 million barrel decline [2]. This modest draw contributed to some selling pressure, as did caution ahead of key US inflation data [2].
Geopolitical risks remain elevated, with reports of Iran’s Islamic Revolutionary Guard Corps striking a US unmanned vessel in the Strait of Hormuz and Yemen’s Houthis seizing the Red Sea city of Mocha, expanding control over the Bab al-Mandeb strait [2]. These developments have heightened fears of prolonged supply disruptions, which could further support oil prices [2]. US President Donald Trump stated that he is not seeking a deal with Iran and does not expect oil prices to fall until after the November midterm elections [2].
Commodity strategists at TD Securities note that crude continues to rally amid persistent geopolitical tensions, with the market remaining tight due to ongoing conflict and a preference for limited attacks and economic pressure rather than deal-making [2]. Technical analysis indicates that WTI maintains a bullish outlook, trading above key moving averages, though overbought signals suggest the potential for short-term corrections [2].
In summary, China's return to the oil market and escalating Middle East tensions are jointly driving oil prices higher, with both Brent and WTI showing strong bullish momentum. The situation is compounded by modest US inventory draws and ongoing geopolitical risks, keeping the market outlook constructive but volatile [1][2].
CONCLUSION
China's renewed oil buying and heightened Middle East tensions are reinforcing upward pressure on global crude prices, with both Brent and WTI maintaining bullish trends. Market participants expect continued volatility and elevated prices as long as geopolitical risks persist and supply remains tight.