Mirror Review
October 13, 2025
Global oil markets are once again caught in the crossfire of US-China Oil Tensions.
China, the world’s biggest oil importer, is stockpiling crude and expanding its reserves, while the US tightens sanctions and threatens new tariffs.
The result? Increased volatility, nervous traders, and growing uncertainty over how energy markets will adapt to this power struggle.
Here’s a clear breakdown of what’s happening, why it matters, and three scenarios that could define the next 6–12 months of global oil dynamics.
What’s Happening Right Now
U.S. sanctions Chinese firms linked to Iranian crude oil
- The U.S. recently targeted Chinese refineries, oil terminals, and shipping companies accused of facilitating Iranian oil exports.
- A notable example is the Rizhao Shihua Crude Oil Terminal, part-owned by Sinopec, which was accused of receiving Iranian crude. Following the sanctions, a supertanker carrying oil was rerouted to other ports.
- These sanctions are part of the “maximum pressure” US campaign to curb Iran’s oil revenue and limit its regional influence.
Tension in trade & tariffs spills into energy markets
- China recently expanded export controls on rare earth minerals, which raised concerns of retaliation or escalation.
- In response, U.S. President Trump threatened 100% tariffs on all Chinese exports and additional export controls on critical software.
- These moves resulted in sharp drops in oil prices, on fears of weaker demand if global growth slows.
- Prices have since partially recovered, with hopes that diplomatic talks, such as a potential Xi–Trump meeting, could ease tensions.
China strengthens its energy buffer
- China is expanding its strategic oil reserves in a big way. Between 2025 and 2026, it plans to add 11 new storage sites with a total capacity of about 26.8 million cubic meters.
- This expansion gives China more control over its energy security and more room to buy and store oil when prices are low.
- Analysts say China’s oil inventories are already rising, which helps absorb excess supply and stabilize global prices.
China’s import trends & demand dynamics
- China’s crude imports in September 2025 rose 3.9% year-on-year to around 47.25 million metric tons (about 11.5 million barrels per day). Overall imports for the first three quarters grew 2.6%.
- However, refiners are facing challenges such as import quota limits and weaker profit margins. This leads to irregular shipment patterns and fluctuating crude deliveries.
Why The US-China Oil Tensions Matter
Oil prices are not driven by supply and demand alone. Political risk, or even the fear of it, can move markets just as strongly.
- Sanctions shift global oil routes. When refineries, ports, or shipping firms are blacklisted, oil traders must find alternate paths, raising costs and disrupting flows.
- China’s buying power shapes price floors. As the largest oil importer, its decision to stockpile crude can quietly support global prices, while weaker demand can pull them down.
- Trade wars and tariffs act as a “fear premium.” Each new policy announcement adds uncertainty, which investors quickly price into commodities like oil.
In short, energy has become a weapon of economic strategy that both the US and China are using.
Three Possible Scenarios for the Next 6–12 Months
1. Escalation: The U.S. expands sanctions, China retaliates
The U.S. could broaden sanctions to target more refineries, shipping firms, or financial intermediaries linked to Iranian or Russian oil. China might retaliate through diplomatic protests, trade restrictions, or by deepening its oil trade with Russia and Iran outside U.S. systems.
Impact on oil markets:
- Short-term price spikes as traders fear supply disruptions.
- Increased freight costs and port congestion as shipments reroute.
- China absorbs more surplus crude into reserves, supporting prices despite the tension.
Expected price range: Brent oil could fluctuate between $70–$90 per barrel, with short-lived surges during sanction announcements.
What to watch: U.S. Treasury (OFAC) sanction lists, diverted tanker routes, and China’s crude import data.
2. Strategic Pause: Diplomacy cools the tensions
Further escalation of the US-China oil tensions can be paused if both sides decide to protect economic stability. A short-term pause in tensions, such as a possible Xi–Trump meeting, could help calm market fears.
Impact on oil markets:
- Prices stabilize and follow fundamentals like OPEC+ output and seasonal demand.
- China keeps buying for reserves, acting as a steady buyer.
- Supply chains normalize after months of redirection.
Expected price range: $80–85 per barrel, steady with mild upward bias if global demand improves.
What to watch: Diplomatic statements, tariff policy adjustments, and reports of China’s reserve expansion.
3. Prolonged Cold War: A long-term energy realignment
If the rivalry deepens, the world could see a partial decoupling of energy systems. China may increase yuan-based oil trade and deepen links with Russia, Iran, and Gulf states. The U.S. and its allies might respond by tightening technology and financial access for China-linked energy firms.
Impact on oil markets:
- Global oil trade splits into parallel networks — one led by the U.S. and allies, another centered on China.
- Higher transaction costs, insurance challenges, and regional price gaps.
- Persistent market volatility as energy corridors shift.
Expected price trend: Long-term structural volatility rather than daily swings. The market may become more fragmented and less predictable.
What to watch: Non-dollar oil contracts, long-term supply deals with sanctioned producers, and growth in China’s storage capacity.
What It Means for Stakeholders
- For traders and investors: Monitor sanction updates and shipping data. Even small policy changes can trigger big price reactions.
- For refiners and importers: Diversify suppliers and build storage flexibility to handle sudden rerouting.
- For policy-makers: Energy is now a key tool of foreign policy. Building resilient and diversified supply systems is essential.
Bottom Line
The US-China oil tensions have added a new layer of geopolitical risk to global oil markets. Every sanction, trade threat, or diplomatic signal can move prices and reshape supply chains overnight.
Over the next year, three paths are possible:
- A short-term price spike if sanctions intensify,
- A stabilization if diplomacy prevails, or
- A slow realignment of the world’s energy networks if rivalry becomes the new normal.
Either way, oil is no longer just a commodity. It’s the front line of a power struggle between the world’s two largest economies.
