Why China Is Driving Short-Term Oil Prices But OPEC Still Holds the Lever

For most of the past decade, oil markets have treated decisions by OPEC as the primary signal for price direction. That hierarchy is being tested, but not overturned. What has changed is where traders look for short-term cues. Increasingly, those cues are coming from China, not because Beijing controls supply, but because its buying behavior now dominates marginal demand and near-term price discovery.

As reported by Reuters, China has overtaken OPEC as the most influential force in oil price formation, driven by the scale and timing of its crude purchases rather than any formal attempt to manage prices. The change shows us how oil markets have become increasingly demand-led, with China sitting right in the center.

China is the world’s largest crude importer, but its influence extends beyond just the volumes that make headlines.

Refinitiv analysts recently noted that the traditional view of producers like OPEC+ as the primary oil price setters has been “challenged in 2025 by China,” explaining that Beijing’s use of strategic stockpiles to provide a crude price floor and ceiling effectively supplanted producer group direction this year. citeanalyst voices added, I can provide additional options.

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Unlike OECD buyers, China’s oil system blends state-owned majors, independent refiners, and strategic stockpiling entities whose buying behavior is opaque and often poorly reflected in real-time data. Cargoes can move into commercial storage, strategic reserves, or floating storage with limited visibility. That uncertainty itself has become a market variable.

When Chinese buying accelerates, prices tend to firm even if global supply remains healthy. When imports slow, prices drop even with OPEC output restraint. Over the past two years, this pattern has repeated enough times that traders now treat Chinese import momentum as a more immediate price driver than OPEC production targets, many of which are either anticipated or only partially implemented.

OPEC (and particularly Saudi Arabia) still controls the bulk of global spare capacity. That capacity continues to anchor longer-term expectations. But spare capacity matters less when demand fluctuations dominate short-term pricing. In today’s market, the marginal barrel is shaped more by whether China is actively pulling crude from the market.

Chinese refinery margins have become an early indicator for price direction. When margins improve, especially among independent refiners, crude imports typically rise. When margins tighten, buying slows quickly. Because these refiners operate with short planning cycles and limited balance-sheet flexibility, their behavior introduces volatility that OPEC policy cannot easily smooth.

Geopolitics also throws itself in the mix here, with China increasing crude intake from Russia and other sanctioned suppliers under alternative pricing arrangements, weakening the link between OPEC decisions and spot prices by shifting trade into channels where supply discipline and benchmark signaling are less effective.

No, it doesn’t mean that OPEC is irrelevant. The cartel’s policy decisions still shape the medium-term balance and set boundaries for price expectations. But the market’s center of gravity has shifted, with traders now watching Chinese customs data, refinery runs, and policy cues with the same intensity once reserved for OPEC communiqués.

None of this means that China has replaced producers as the ultimate price setter. China’s influence operates at the margin and in the short term, not in moments of genuine supply stress. Strategic stockpiling and opaque buying can move prices when barrels are abundant, but they cannot cap prices during a true supply shock, nor defend a floor once inventories normalize and demand slows.

When markets tighten, pricing power reverts quickly to those who control spare capacity. On that front, OPEC (and primarily, Saudi Arabia) still holds the decisive lever. China’s signals may be easy for traders to trade, but they remain conditional. If Beijing were truly setting prices, it would be able to sustain them. Whether it can do so will ultimately test the limits of this thesis.

By Charles Kennedy for Oilprice.com

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