Energy

Energy markets remain one of the most powerful transmission channels between geopolitics, economic growth, and consumer prices worldwide. With two fresh data points in front of us, the picture is worth watching closely. If you look at the 2 charts below, you can see it clearly. First, China’s crude net imports have not recovered to pre-tensions levels. If you look at the top chart, you can see that the red line (2026) shows a dramatic drop versus the 2025 trajectory (blue). Year-over-year change sits at -4.5 mb/d, with an even sharper decline since late February. Asia ex-China is relatively stable, but the China pullback is significant. Second, U.S. crude inventories (bottom chart ) are at multi-year lows.

After a volatile few years, inventories have fallen sharply in 2026, sitting near the bottom of the long-term range. Why has China reduced dramatically its oil imports? In short, because it can. They were the main buyers of Iranian oil, but they developed alternative sources of Energy and unlike the west they were fully prepared for a shock. It still hurts, but they can wait for a resolution of the conflict unlike Europe or the US. What’s the bottom line for the world economy? (1) Lower Chinese imports ease some global demand pressure in the short term, but extremely low U.S. inventories leave the market vulnerable to any supply shock. (2) Energy is still a core inflation driver. Even modest oil price spikes feed directly into transportation, manufacturing, and food costs, amplifying headline CPI and complicating central bank decisions. (3) For import-dependent economies (Europe), sustained higher energy costs act as a tax on consumers and margins. For producers, it’s a mixed blessing depending on fiscal breakeven levels and currency effects. It’s a very delicate balance, that, if breached, could have major implications for geopolitics and global monetary policy, and it’s difficult to see any major advance in the resolution of the Iranian conflict.

Want to know more? You can register for free at Fund@mental.

#iamfundamental #soyfundamental #wealthmanagement #familyoffice #financialadvisor #financialplanning #policymistake #ratecut #stagflation