Fuel Stocks Near Exhaustion as Hormuz Stays Shut and Houthis Resume Red Sea Attacks
China's strategic reserve drawdowns have kept ICE Brent near $85 despite the Hormuz closure, but analysts warn those buffers are close to gone.
ICE Brent crude front-month was trading at $84.61 a barrel on Tuesday (2026-08-04), a price that would look unremarkable in a normal market. This is not a normal market. The Strait of Hormuz, which once carried roughly 20 million barrels per day, remains largely shut. Yemen's Houthis have resumed attacks on tankers after a ceasefire collapsed in late July (2026-07-26), eroding the 4 to 5 million barrels per day of Saudi crude that had been rerouting through the Red Sea's Bab el-Mandeb chokepoint in recent weeks, according to different estimates.7
The gap between disruption and price has one primary explanation: China chose to sit the market out. Beijing accumulated large strategic reserves before the Iran conflict and then slashed imports dramatically to draw on those stocks, cutting crude purchases by an estimated 4.4 million barrels per day below the 2025 average. Official Chinese customs data released on Tuesday (2026-07-14) showed imports fell 41.3% year-on-year in June to 7.12 million barrels per day.6
Demand destruction has extended the buffer. The International Energy Agency reported, via Reuters, that European diesel consumption fell 5.7% in May (2026-05); Chinese diesel demand fell 10% in the same month, with gasoline down a more modest 5%. That combination of reduced buying from the world's largest crude importer and compressed European consumption has absorbed a supply shock of unusual severity.7
But inventory draws are becoming impossible to ignore. The IEA warned that global oil stocks were being drawn down at a record pace, with governments and industry releasing 164 million barrels as of May 8 (2026-05-08). Around 1 billion barrels of supply has been lost since the conflict began, by industry estimates, dwarfing the IEA's planned total release of 400 million barrels. Oil industry executives warned the Trump administration directly in early June (2026-06-04) that conditions amounted to "tank bottom," after which prices were likely to surge within weeks.1,2,4
The narrow window provided by the U.S.-Iran memorandum of understanding, during which Gulf producers rushed crude through Hormuz while the corridor was briefly open, is now closed. Oilprice.com reported on Saturday (2026-07-26) that what had briefly resembled a glut scenario evaporated when missiles began flying again and Houthis resumed tanker strikes. Losses along the Kazakh Caspian Pipeline Consortium route to Novorossiysk contribute another 1.7 million barrels per day to the global supply shortfall.7
The buffer keeping Brent away from the $109.26 a barrel seen on Friday (2026-05-15) is almost entirely Chinese. Martijn Rats of Morgan Stanley has suggested crude held in underground Chinese caverns has been moving above ground to cover the global shortfall, a process likely to accelerate as Chinese refineries exit their maintenance season. Goldman Sachs analysts say Beijing could accelerate buying for July and August, partly because Gulf producers have slashed their official selling prices and partly because China would not want its amassed reserves run through too fast.3,6
Even a diplomatic resolution would not produce an immediate supply fix. The IEA estimates that after any mines are cleared, a minimum of two to three months would be required to re-establish steady export operations, reflecting the time needed to move oil-laden tankers out of the Gulf, reposition ballast tonnage, and restore loading procedures at Gulf terminals.5
When China does return to the market as a buyer in volume, the arithmetic changes sharply. The Red Sea alternative handles a fraction of what Hormuz once moved. Kazakh exports remain impaired. The IEA drawdown pace is running at a record. The current ICE Brent front-month price of $84.61 is a bet that Chinese stocks are still sufficient to bridge the gap — and Goldman analysts say the tipping point where Beijing accelerates purchasing could come in the weeks ahead.6,7