The China ‘put’ in oil markets will reshape the world

THERE are few things sellers in financial markets like more than a government “put”. 

Such a situation – where a powerful state player makes a tacit promise to buy whenever prices fall too low, similar to the put contracts used by options traders – can dampen risk for years. The “Greenspan put” helped prop up equity markets from the 1980s to the 2000s, while the “Biden put” buoyed crude for two years until last November.

Something similar has been happening with China’s actions in the oil market. The biggest importer has been stockpiling hydrocarbons, despite the fact that its own consumption already appears to be peaking. That is helping the world ride out a surge in supply as the Organization of the Petroleum Exporting Countries (Opec) unwinds quota restrictions imposed since 2022.