Asia’s oil rebound is running cargoes and Chinese inventories

Asia’s oil rebound is being fueled by ships that got unstuck, not ships returning to normal routes. Asia's crude imports climbed to 22.8 mn bbl/d in July — the highest level since the war began, and almost 22% above April's low of 18.8 mn bbl/d — but arrivals remained 4 mn bbl/d, or 15%, below the 26.9 mn bbl/d average recorded in the three months before the US and Israeli strikes on Iran began on 28 February. Refined fuels are lagging further behind, with imports of light and middle distillates rose to 5.8 mn bbl/d in July, up from a record low of 5.2 mn bbl/d in June, but still 1.3 mn bbl/d (18.5%) below the pre-war average of 7 mn bbl/d, Reuters reports.

The gap is sitting at Hormuz: Asia received 4 mn bbl/d of crude through the strait in July — up from almost 2 mn bbl/d in April, but still 70% below the pre-war average of 13.6 mn bbl/d — meaning Hormuz supplied only around 18% of Asia's total crude imports in July, by our calculation. Refined products through the strait show the same shortfall: 608k bbl/d in July, up from 144k bbl/d in May but still around 60% below the pre-war average of 1.5 mn bbl/d.

Most of that gain is a backlog clearing, not a route reopening. The brief mid-June ceasefire let tankers stranded inside the Gulf by Hormuz's effective closure finally leave, and those shipments reaching their destinations drove much of July's increase — some 200 mn barrels escaped the Gulf during the truce, equivalent to about two days of global consumption. Iran's own sanctions window followed the same pattern — Kpler tracked 34.5 mn barrels crossing Hormuz aboard 21 tankers between mid-June and 10 July, while roughly 63 mn barrels of Iranian crude were still sitting aboard tankers in Gulf and Asian waters in mid-July.

Buyers unwilling to shoulder Hormuz transit risk themselves are gravitating toward delivered Iraqi cargoes — and Beijing is absorbing the rest of the shock. Somo sales leave buyers to arrange vessels and absorb freight and Hormuz transit risk themselves, while TotalEnergies has been chartering VLCCs and offering Basrah Medium and Heavy to Asian refiners on delivered terms. China, meanwhile, is doing the opposite — seaborne crude imports rebounded to nearly 7 mn bbl/d in July from a decade-low in June, but remained 39% below the pre-war average. With at least 1.2 bn barrels in storage, Beijing can keep drawing down inventories and suppressing imports for months — making its eventual return a key test for an already constrained Gulf oil market.

OUR TAKE- Cargoes released during the ceasefire should keep supporting arrivals this month, but that tailwind fades once they clear the system. A durable recovery needs tankers to return to Gulf terminals, load new cargoes, and exit repeatedly — not a one-off unloading of vessels that were already waiting inside the strait when the ceasefire hit.