China remains the biggest driver of oil prices
On Thursday, oil prices stabilized at their highest level Since December 1, the market is turning bullish due to China’s demand for oil this year.
Analysts say that reopening in China will drive oil demand growth and push oil higher if most advanced economies can avoid recessions.
China likely accelerated the pace of stockpiling crude oil last year, according to the estimates By Clyde Russell, Reuters Asia Commodities and Energy columnist, based on Chinese data on imports, domestic production and refinery processing rates.
More inventories in commercial and strategic storage could mean that China’s imports may not be as strong as expected. But it could also mean that refiners are preparing for an increase in demand in the coming months once the Covid exit wave fades after the restrictions are lifted.
Since China does not report crude oil inventories, it is all guesswork as to how much crude oil the country has stashed over the past year.
As China reopened its borders in early January, authorities issued Huge batch of allowances For independent refineries to import crude oil.
Related: EIA Inventory Report Drives Oil Down
There is one certainty in the oil markets – China’s economic growth has been and will continue to be a major factor in global oil demand, capable of moving oil prices in either direction.
Over the past few days, the main driver of oil prices has been the reopening of China and the improved outlook on Chinese demand due to the reopening. The Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) said in their monthly reports this week that the outlook for global oil demand is improving thanks to China’s exit from the “zero Covid” policy.
China’s reopening is set to boost global oil demand Record The IEA said in its report that 101.7 million barrels per day this year, up 1.9 million barrels per day from 2022, raising the demand growth estimate for 2023 by 200,000 barrels per day from the 1.7 million barrels per day expected in December.
“Two important cards dominate the oil market outlook for 2023: Russia and China,” IEA He said In the oil market report.
“China will drive nearly half of this growth in global demand even as the form and speed of its reopening remains uncertain.”
OPEC also expressed more optimism about Chinese oil demand and the global economy this year Monthly oil market report (Ministry Of Agriculture).
OPEC said China’s reopening would push demand higher, and “in addition, China’s plans to expand fiscal spending to aid the economic recovery are likely to support demand for oil in manufacturing, construction and transportation.”
The organization said that economies globally appear to be more resilient than previously expected.
Global momentum in Q4-22 appears to be stronger than previously expected, likely to provide a sound base for 2023, particularly in OECD economies. Growth in 2022 in both the euro area and the United States has exceeded previous expectations.”
Moreover, the United States seems to have more chances to avoid a recession this year.
“The upside potential may come from the US Federal Reserve managing a soft landing in the US. This is the most likely outcome, given the expected slowdown in inflation and adequate underlying demand dynamics,” according to the organization.
Recession fears may have subsided, but the oil market is still reacting to selling off every point of weak economic data from the US, Europe or China.
However, market sentiment has turned bullish towards China over the past two weeks, sending oil prices higher. This highlights the fact that the Chinese economy and oil demand will continue to drive oil markets this year, along with economic performance elsewhere, the extent of Russian oil supply losses, and the OPEC+ group’s policy to balance the market and support prices.
By Tsvetana Paraskova for Oilprice.com
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