Russell: The Xi-Trump Summit could help the Iranian crude oil market.

What is the best outcome of the meeting between U.S. president Donald Trump and his 'Chinese counterpart Xi Jinping in the context of the increasingly stressed crude market?

Ideally, Xi would convince Trump that 'the United States won their war against Iran' and that the best way for them to cement this victory was to leave the Middle East conflict.

Xi can also 'use his influence over Iran to encourage Iran to give Trump a token of victory. For example, a promise to once again submit its nuclear program to international inspections.

The question is if Xi will use China's influence over the United States as well as Iran to promote a solution for the closure of the Strait of Hormuz.

Before the U.S.-Israeli attack on Iran, on February 28, about 20% of crude oil, refined products and one fifth of liquefied gas were transported through this narrow waterway.

By the end of the month, about 1 billion barrels of oil will have been lost from the global supply. The rapid depletion of stocks means that, unless the Strait of Hormuz can be fully reopened in the next few weeks, the only way to reduce demand is to raise crude prices.

China prefers to keep its diplomacy behind the scenes, rather than engage in public diplomatic activities.

The meeting on Thursday between the two leaders will likely follow a script which allows both leaders to appear to achieve?positive outcomes.

This means that for Trump, the success of the relationship between the two world's largest economies will be defined by the amount China is willing to spend on things like U.S. commercial aircraft and energy exports.

Xi's public success will be a calming of trade tensions, and a recognition that China is still a major source of metals.

CHINA SUFFERS HARMLESSLY TOO

It is likely that the most important discussions are those not made public. The war against Iran will probably be given top billing.

China's position on the conflict is likely to change.

Beijing may have enjoyed the early miscalculations of Trump and Israel. These mistakes have hurt the perceptions of the U.S. in terms both military and political power, and they've also angered Washington's Western allies who are now suffering from the financial fallout due to the soaring energy prices.

The Chinese economy will feel the effects of the war the longer it continues and the Strait of Hormuz is largely closed.

Not just the rise of crude oil prices by more than half. Closed straits are affecting supply chains for materials essential to China's new energy industries, such as electric vehicles and batteries storage systems.

Sulphuric Acid, which is used to extract metals for energy transition such as nickel and copper, will become more expensive and less available due to the?loss' of 50% of seaborne sulphur.

Beijing may also be concerned about the impact of rising global inflation on China's manufacturing industry.

It is a question of whether the economic pain Beijing is beginning to anticipate will be enough to make Xi try to 'exercise his influence on Trump and Iran.

Will Trump and Iran act if Xi tries to force a settlement to reopen the Strait of Hormuz?

History has shown that wars will not end if both sides believe they have the time and are on their side.

Trump seems to think that his blockade of Iran’s ports will force Tehran into bending to his will at the negotiation table. Iran, on the other hand, appears confident that its control over the Strait of Hormuz would eventually cause Trump so much economic pain in the world that he will be forced to concede to its demands.

Both sides run the risk of overplaying their cards.

The most important contribution Xi can make is to try and instill a sense reality in both Trump and Iran and to chart a course that will allow both sides claim victory even if nobody but their core supporters believes it.

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These are the views of the columnist, who is also an author. (Editing by SonaliPaul)

(source: Reuters)