- Crude Price Spike Softened by Rising Global Inventories.
- Ceasefire and Stockpiles Limit Oil Market Impact of Conflict.
- China Leads Stockpiling as Oil Prices React to Middle East Unrest.
Over the last month, crude oil prices have seen quite a bit of ups and downs, largely due to rising tensions between Israel and Iran in the Middle East. While there was a real possibility that this conflict could disrupt trade flows and push oil prices over $90 per barrel, thankfully, that didn’t happen. A US-brokered ceasefire played a big role in calming geopolitical worries, and the steady increase in global onshore crude inventories helped keep the market stable, reports Break Wave Advisors.
Onshore Inventories Act as a Safety Net
Since mid-February, global onshore crude inventories have been on the rise, following typical seasonal patterns. By mid-May, these inventories had already exceeded 2024 levels and have stayed high since then. This increase was mainly fueled by attractive crude prices that prompted Chinese buyers to stock up on reserves, along with OPEC+ deciding to gradually roll back voluntary production cuts. While there has been some drawdown in the past week, inventory levels are still significantly higher than they were a year ago, providing ongoing support to the oil market.
Ceasefire Calms Markets, Reverses Price Surge
During the peak of the Israel-Iran conflict, Brent crude prices hit $77 per barrel, and WTI reached $74 per barrel. However, these prices quickly fell back to early June levels once the ceasefire was established by the United States. Importantly, the ceasefire ensured that oil flow through the Strait of Hormuz, a crucial chokepoint for global energy trade, remained uninterrupted. Consequently, the price hike was largely seen as a temporary war premium rather than a sign of real supply disruption.
China Drives Aggressive Stock-Building
A big chunk of the global inventory boost is coming from key demand hotspots in Far East Asia, South Asia, and Northwest Europe, likely gearing up for a potential escalation in the Middle East conflict. Among these areas, China is at the forefront, hitting new seasonal highs in inventory levels. The stockpiling kicked off as early as October 2024, but it really picked up speed in April 2025 and hasn’t slowed down since.
In China, the inventory growth can be split between state-owned facilities, mainly driven by Sinopec, and the Shandong region, which is home to independent refiners known as teapots. While Shandong’s stockpiles have been steadily increasing since 2024, Sinopec has ramped up its stockpiling efforts significantly in recent months. The drop in crude prices has played a big role in this trend, but rising worries about instability in the Middle East might have pushed China to buy even more aggressively.
Outlook Remains Uncertain Despite Temporary Calm
Right now, the ceasefire between Israel and Iran seems to be holding, and it looks like the US is giving a nod to China’s ongoing purchases of Iranian oil. However, with the current US administration’s unpredictability and the delicate state of peace in the Middle East, it’s tough to predict how crude prices will shift for the rest of 2025. One thing is clear: if conflict flares up again in the region, we might not see dramatic spikes in oil prices, thanks to the high levels of global onshore inventories that are keeping the market from overreacting to geopolitical turmoil.
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Source: Break Wave Advisors
