Risks From Lower Gulf Flows and Higher China Imports

Research evidence excerpt

Risks From Lower Gulf Flows and Higher China Imports

Goldman Sachs Oil Analyst

already weighed on activity by non-Middle Eastern and private shippers even

before the latest escalation (Exhibit 8).

n China crude imports may have bottomed. China crude net imports fell by 5mb/d

year-over-year in June, even as imports by its Asian neighbors had recovered to

seasonal norms (Exhibit 9). In our view, China crude imports need not rebound

immediately, given still-elevated estimated total oil inventories of 1.9 billion barrels

(117 days of demand) and its ability to substitute some oil demand by coal and

power. Still, China crude imports are likely to rise for three reasons.

a. The imports’ decline appears unusually large relative to the price increase

(Exhibit 10).

b. Historical price sensitivity suggests an imports’ rebound after Middle Eastern

producers cut July–August selling prices below regional benchmarks.

c. Sustained crude destocking at an estimated 2mb/d pace would likely be

inconsistent with Beijing’s long-term goal of building inventory buffers.

n Short-term upside risks to prices, medium-term downside. We continue to see

two-sided risks to our Brent crude price forecast of $80 in 2026Q4 and $75 in 2027,

with risks skewed to the upside in the near term as the risk of further attacks on

tankers and Middle East energy infrastructure has increased (Exhibit 11). Brent could

overshoot $110/bbl in 2026Q4 if the Gulf export recovery continues to stall,

delaying the production rebound and requiring a larger demand response.

Conversely, June’s swift recovery in flows showed that Gulf exports can rebound

quickly after de-escalation, with Brent potentially falling in the $60s by year-end if

production beats expectations and demand recovers more slowly amid high retail