Thinning commercial stockpiles have forced China back into the physical crude market earlier than anticipated to secure prompt crude barrels ahead of an expected demand recovery, analysts said.
Saxo Bank analysts said on Thursday that "China is reportedly set to resume crude purchases this month."
However, market experts toldrecently that China could resume crude imports as soon as October.
Chinese crude oil imports rose for a second straight month in August, as cargoes from the Persian Gulf crept higher and refiners increased purchases from other sources, according toanalysis of data from LSEG and Bloomberg.
Importers shipped in 37.9 million tons last month, 6.2% more than the 35.7 million tons recorded in July, according to Bloomberg, citing data released on Tuesday by the General Administration of Customs of China.
While macroeconomic headlines and Middle East tensions continue to fuel volatility, physical market fundamentals are providing a hard floor.
Both Brent and West Texas Intermediate futures crossed the triple-digit mark for the first time since May this week.
"Adding to the bullish sentiment is China's increased activity in the physical market, particularly in the North Sea, where Dated Brent has seen more strength," ING analysts said.
The resurgence in physical demand is visible across the global pricing structure.
Front-month cash basket for Brent, Forties, Oseberg, Ekofisk, and Troll (BFO-1M), the benchmark assessment reflecting the physical value of prompt North Sea wet barrels surged 3.3% to $105.16 per barrel.
Wet barrels are actual barrels of oil being traded and shipped, as opposed to paper barrels which are right to purchase barrels of oil.
Leading physical grades within the BFOET basket are showing severe tightness. Forties (FOT-E) is trading above $120, while premium Norwegian sweet crude Ekofisk (EKO-E) has surged to $124.62/bbl.
Physical cash Brent (BRT-spot) surged to $120.35 per barrel, highlighting a massive premium over headline futures as prompt supply scarcity gripped the market.
This physical accumulation aligns with insights from analytics firms like Kpler and ANZ, indicating that months of inventory drawdowns have depleted domestic buffers.
Consequently, Chinese buyers are actively securing Atlantic Basin cargoes. "While imports remain well below year-ago levels, they've started to recover from the lows seen in June; recent physical-market activity suggests this could continue," ING added.
US President Donald Trump remarked Wednesday that crude prices above $100 could persist through the midterm elections before tumbling downward, but this physical inventory squeeze ensures that the immediate price floor remains supported independent of political forecasts.