With oil prices depressed, China presides over a buyer’s market

WHEN OIL supply threatened to overwhelm storage tanks in Cushing, Oklahoma, in April, the pain was felt as far as Chongqing. Retail investors in the Bank of China’s oil bao, or “treasure”, a speculative vehicle linked to crude futures, took a hit as the May contract for West Texas Intermediate settled at an astonishing -$37.63 a barrel on April 20th. The market’s gyrations have led to consternation in China—regulators have reportedly called for an investigation—and revealed unexpected victims. In general, though, plunging prices have served Chinese buyers rather well.

In 2017 China became the world’s biggest importer of crude, surpassing America, and the second-largest importer of liquefied natural gas (LNG), behind Japan. Dependence on foreign fuels has long been deemed a strategic vulnerability. But now oil and gas suppliers are toiling to secure Chinese buyers, not the other way round.

China’s heft was set to grow even before covid-19 kept cars parked and planes grounded. In the long term the growth of China’s population and economy make it a likely source of rising demand, even if climate change clouds prospects for oil and gas elsewhere. Companies and petrostates have worked to secure their share of China’s market: Russia’s Power of Siberia gas pipeline opened in December; ExxonMobil’s...