The international oil market is experiencing disruption as increased supply flows through the reopened Hormuz Strait, according to JP Morgan commodity strategist Natasha Kaneva. The supply surge is colliding with a market that does not currently need the oil, creating a contradiction in market dynamics. China's significant reduction in oil imports during 2025 has exacerbated the situation, as the country previously purchased large volumes of crude oil exceeding its domestic consumption needs, which had helped support oil prices during periods of supply surplus.
Chinese Import Reduction Creates Supply Redistribution
China's abrupt halt in oil imports has allowed countries that struggled to find supply sources for their economies to access international markets, Kaneva noted. Millions of barrels of crude oil that were trapped in the Persian Gulf are now flooding back into a market that had been adapting to operate with reduced availability.
During 2025, China purchased massive quantities of crude oil beyond its domestic consumption requirements. This buying activity contributed to supporting the price floor during a period of supply excess. The sudden cessation of these imports has fundamentally altered market dynamics.
Investigations are currently underway to determine whether China's sharp drop in internal oil demand during the war period represents a temporary wartime adaptation or signals a structural shift in fossil fuel consumption patterns.
Market Faces Temporary Oversupply as Systems Adapt
"Oil leaving Hormuz is increasingly finding nowhere to go except China, but China is not buying," Kaneva stated. "The immediate result is clear: the market faces a temporary oversupply risk because oil will re-enter systems that have already learned to function without petroleum for months."
However, this does not necessarily mean oil prices will collapse. Kaneva anticipates that Chinese refineries will re-enter the market and begin purchasing, while other countries and private companies with depleted storage facilities will rebuild inventories. These two factors will take time to materialize.
According to the International Energy Agency, global oil demand is projected to decline by approximately 1.1 million barrels per day this year. Massive oil supply is expected through 2027.
Kaneva added that the oil market is undergoing a system reboot similar to a computer restart.
FAQ
What caused the disruption in the international oil market?
The disruption resulted from increased oil supply following the reopening of the Hormuz Strait, combined with China's significant reduction in oil imports during 2025. Millions of barrels previously trapped in the Persian Gulf are now entering a market that had adapted to function with reduced oil availability.
How much is global oil demand expected to decline?
According to the International Energy Agency, global oil demand is projected to decline by approximately 1.1 million barrels per day this year, with massive oil supply expected to continue through 2027.
