Analyst: China's shrinking oil demand is a bigger threat than Houthi blockades

The Houthi threat is real. An economic report, however, suggests that China's declining appetite for oil—driven by electric vehicles, lower imports, and rising inventories—poses a far more sustainable risk to crude prices. The biggest importer is shifting gears.

A temporary risk at Bab el-Mandeb

Henik Fung, an analyst at Bloomberg Intelligence, states that a Houthi closure of the Bab el-Mandeb strait could cut off over 4 million barrels of crude oil daily. This would send prices higher and benefit producers like Sinopec and Inpex. But this is a temporary risk premium, not a structural price shift. West Texas Intermediate crude could range between $70 and $100 per barrel, depending on the Middle East conflict and China's consumption trends.

China is the real problem

Geopolitical tensions matter. Yet the sustainable factor is China's falling demand. Electric cars, lower imports, and swelling stockpiles point to one trend: declining consumption. Fung calls China "the biggest problem people are ignoring" in oil. He argues that China's reduced reliance on oil will have more lasting price consequences. A $70 WTI crude price may become the new normal—once the US-Iran dispute is resolved and the risk premium evaporates.

Four million barrels sounds alarming. It's not the whole story. China's shift is the real game-changer. Global markets are watching closely.