How China Could Spark A Major Reversal For Oil Prices

how_china_could_spark_a_major_reversal_for_oil_prices.jpg
Entornointeligente.com /

Home Oil Prices Rig Count Energy Energy-General Oil Prices Crude Oil Heating Oil Gas Prices Natural Gas Coal Company News Interviews Alternative Energy Nuclear Power Solar Energy Hydroelectric Renewable Energy Geothermal Energy Wind Power Fuel Cells Tidal Energy Biofuels Environment Global Warming Oil Spills Geopolitics Africa Asia Europe Indonesia International Middle East North America South America Video Breaking News Premium Articles Community Trade Now My Account Latest Discussions Energy General Oil Stocks & Prices Other Energy Topics Trade Now Get Exclusive Intel All Prices OPEC Blends Canadian Blends U.S. Blends WTI Crude • 10 mins 109.9 -0.39 -0.35% Brent Crude • 10 mins 113.0 -0.43 -0.38% Natural Gas • 11 mins 8.734 -0.010 -0.11% Heating Oil • 39 mins 3.759 -0.010 -0.27% Gasoline • 11 mins 3.673 -0.124 -3.28% Louisiana Light • 4 days 114.2 +0.42 +0.37% Start Trading CFDs Over 2,200 Different Instruments Click Here for 150+ Global Oil Prices Louisiana Light • 4 days 114.2 +0.42 +0.37% Bonny Light • 20 hours 118.0 +1.30 +1.11% Opec Basket • 4 days 114.8 +2.75 +2.45% Mars US • 3 hours 106.5 -0.74 -0.69% Gasoline • 11 mins 3.673 -0.124 -3.28% Click Here for 150+ Global Oil Prices

Start Trading CFDs Over 2,200 Different Instruments

Click Here for 150+ Global Oil Prices

Marine • 20 hours 109.3 +1.54 +1.43% Murban • 20 hours 111.8 +1.35 +1.22% Iran Heavy • 20 hours 108.8 +0.81 +0.75% Basra Light • 175 days 71.69 -3.60 -4.78% Saharan Blend • 20 hours 116.9 +0.93 +0.80% Bonny Light • 20 hours 118.0 +1.30 +1.11% Start Trading CFDs Over 2,200 Different Instruments Click Here for 150+ Global Oil Prices Bonny Light • 20 hours 118.0 +1.30 +1.11% Girassol • 20 hours 113.3 +0.55 +0.49% Opec Basket • 4 days 114.8 +2.75 +2.45% Click Here for 150+ Global Oil Prices

Start Trading CFDs Over 2,200 Different Instruments

Click Here for 150+ Global Oil Prices

Canadian Crude Index • 4 days 91.13 -0.36 -0.39% Western Canadian Select • 19 hours 96.18 +0.39 +0.41% Canadian Condensate • 19 hours 112.4 +0.39 +0.35% Premium Synthetic • 19 hours 110.7 +0.39 +0.35% Sweet Crude • 19 hours 108.6 +0.39 +0.36% Peace Sour • 19 hours 105.7 +0.39 +0.37% Start Trading CFDs Over 2,200 Different Instruments Click Here for 150+ Global Oil Prices Peace Sour • 19 hours 105.7 +0.39 +0.37% Light Sour Blend • 19 hours 107.8 +0.39 +0.36% Syncrude Sweet Premium • 19 hours 111.4 +0.39 +0.35% Central Alberta • 19 hours 106.0 +0.39 +0.37% Click Here for 150+ Global Oil Prices

Start Trading CFDs Over 2,200 Different Instruments

Click Here for 150+ Global Oil Prices

Louisiana Light • 4 days 114.2 +0.42 +0.37% Domestic Swt. @ Cushing • 4 days 109.8 +1.00 +0.92% Giddings • 4 days 103.5 +1.00 +0.98% ANS West Coast • 5 days 116.2 +2.58 +2.27% West Texas Sour • 4 days 107.2 +1.02 +0.96% Eagle Ford • 4 days 111.1 +1.02 +0.93% Start Trading CFDs Over 2,200 Different Instruments Click Here for 150+ Global Oil Prices Eagle Ford • 4 days 111.1 +1.02 +0.93% Oklahoma Sweet • 4 days 109.8 +1.00 +0.92% Kansas Common • 4 days 103.5 +1.00 +0.98% Buena Vista • 6 days 112.6 -5.11 -4.34% Click Here for 150+ Global Oil Prices

Start Trading CFDs Over 2,200 Different Instruments

Click Here for 150+ Global Oil Prices

1D 1M 3M 1Y All Charts Products Discussion Headlines 4 hours American Drivers Set To Pay Record-High Gasoline Prices At Memorial Day 6 hours Tensions Rise As Iraq Prepares To Usurp Kurdish Oil Contracts 7 hours Eni, TotalEnergies Start Drilling Offshore Cyprus 8 hours EV Sales Are Booming, But Battery Metals Remain A Problem 9 hours U.S. Natural Gas Prices Rise As LNG Exports Reach 7-Week High 10 hours IEA: Energy Crisis Shouldn’t Lead To Higher Reliance On Fossil Fuels 11 hours Poland Terminates Deal To Receive Russian Gas 12 hours China Boosts Solar Investments 3 days U.S. Natural Gas Prices Fall As Colder Weather Approaches 3 days EU Gives OK To Pay For Russian Gas In Rubles 3 days Heat Wave Tests the Limits Of Texas Power Grid 3 days Sanctions Force Foreign Executives At Rosneft To Quit 3 days Banks Rush To Assure Texas They Like Oil And Gas 3 days China Gobbles Up Any Spare Oil Barrels To Boost Inventories 3 days Americans Drive More Than Pre-Covid Despite Record Gas Prices 4 days President Biden Considers Meeting Saudi Crown Prince As Oil Prices Soar 4 days Refinery Explosion And Fire Threatens Supply In South Korea 4 days How Allegations Of Bullying And Abuse Caused A Slump In Canadian Oil Trading 4 days Shots Fired As Protesters Fail To Stop Oil Tanker From Loading In Libya 4 days Gas Stations In Washington State Are Running Out Of Fuel 4 days Soaring Energy Imports Put Japan’s Economy Under Pressure 4 days U.S. Shale Merger Creates A New $7 Billion Giant 4 days The U.S. Is Considering Sanctioning Countries That Buy Russian Oil 4 days Gasoline Price-Gouging Bill Passes The House 4 days How The UK’s 35% Duty On Russian Platinum And Palladium Will Impact Markets 4 days Soaring Gasoline Prices Won’t Stop Summer Travel 4 days Asian Gasoline Exports To U.S. Soar 4 days Japan Nuclear Regulator Greenlights Radiactive Water Release From Fukushima 5 days China To Offload 2 Million Barrels of Iranian Crude Despite Sanctions 5 days Ex-German Chancellor Could Be Sanctioned Over Rosneft Ties 5 days Gasoline Prices Top $6 In California, $9 In Parts Of Europe 5 days Oil, Gas Employment Will Take Five Years To Recover From Covid: Rystad 5 days Insurers Are Suffering Major Losses Due To Climate Change 5 days «Fossil Fuels Are A Dead End,» UN Secretary-General Says 5 days Russia Increasingly Using Own Oil Tankers To Boost Shipments To Asia 5 days Saudi Oil Revenue To Surge 66% To $249 Billion On High Prices 5 days Russia Could Halt Gas Supply To Finland On Friday 5 days Russia’s Gas Flows Via Ukraine Plunged 50% In The Past Week 6 days API Reports Inventory Draws In Crude, Gasoline Despite SPR Release 6 days Libyan Oil Deadlocked As Clashes Force PM-Designate Out of Tripoli 4 minutes «Natural Gas Trading Picks Up Considerably Amid High Volatility» by Charles Kennedy – …And is U.S. NatGas Futures dramatically overbought at the $6.35 range? 8 minutes How Far Have We Really Gotten With Alternative Energy 12 minutes  What Russia has reached over three months diplomatic and military pressure on West ? 1 min GREEN NEW DEAL = BLIZZARD OF LIES 2 days What China is Learning from Russia’s War in Ukraine and its Consequences 13 mins «Russia will stop ‘in a moment’ if Ukraine meets terms – Kremlin» by Reuters via Yahoo News…but Reuters suddenly cut out the balanced part of the story. 39 mins Advancing Fundamental Drilling Science – Geothermal drilling successes offer potential gain for petroleum industry 1 day Natural Gas is the Cleanest and most Likely Source of Energy to Fuel the World. 4 days Failure To Implement Russian Oil Ban Could Send Oil Crashing To $65 5 days Revisiting: «The U.S. Grid Isn’t Ready For A Major Shift To Renewables» from March 2021 by Irina Slav at OILPRICE Sell Buy Sell Buy Sell Buy Sell Buy Sell Buy Breaking News: American Drivers Set To Pay Record-High Gasoline Prices At Memorial Day

Find us on:

World Sees First Global Energy Shock: World Energy Council The world is experiencing the…

Afghanistan Can’t Pay Its Biggest Electricity Suppliers Sanctions against the Taliban government…

How Russia Has Revived NATO Putin now claims that he…

Home Energy Energy-General Simon Watkins

Simon Watkins is a former senior FX trader and salesman, financial journalist, and best-selling author. He was Head of Forex Institutional Sales and Trading for…

More Info

Share Facebook Twitter Linkedin Reddit Premium Content How China Could Spark A Major Reversal For Oil Prices By Simon Watkins – May 23, 2022, 7:00 PM CDT China is the single most important oil buyer in the global market, and its battle with COVID is set to seriously damage both its economic growth and its oil demand. By May, analysts were estimating a one million barrel per day reduction in oil demand from the country, with no end in sight for the decline.  While China was able to bounce back rapidly from COVID in 2020, current conditions will make it incredibly difficult to repeat that recovery. Join Our Community The huge discrepancy between China’s massive economic growth and its minimal oil and gas reserves made it the big global backstop bid for crude oil and many other commodities over the past 20 years or so. According to figures from the Energy Information Administration (EIA), China surpassed the U.S. as the largest annual gross crude oil importer in the world in 2017, having become the world’s largest net importer of total petroleum and other liquid fuels in 2013. Since the full breakout of the COVID-19 virus across the world in 2020, China’s strictly-enforced ‘zero-COVID’ policy has damaged its economic growth engine and its appetite for the oil and gas used to fuel it. There have been murmurings that this policy may be relaxed but these have not proven correct and are unlikely to be in the near future, leaving the big bid sidelined in the oil markets, and a plethora of other bearish factors set to dramatically push oil prices down.

At the outset of March, China saw the largest wave of COVID infections since those across Wuhan in early 2020, with the new cases focused across its northeast and coastal regions, mostly in the Jilin and Shandong provinces. At that point, although official rhetoric did not signal any softening in the zero-COVID containment strategy in the near term, the previous December had seen a refinement of the strategy to one incorporating the idea of ‘dynamic clearing’. «This provided local governments more flexibility in imposing restrictions, allowing daily increases in symptomatic cases to be capped at around 200 on a national basis,» Eugenia Fabon Victorino, head of Asia Strategy for SEB, in Singapore, told Oilprice.com . Even back then, though, she added, there were clear limits to this flexibility, with China’s still-aggressive approach to tracing possible exposures to the virus putting more than 184,000 individuals under medical observation in isolation within two weeks or so of that new March outbreak. 

Soft though oil prices looked at that stage, they looked considerably softer still with news at the end of March that the economic powerhouse city of Shanghai, population 26 million, had been placed in a two-stage lockdown. This was then followed in early April by news that the authorities in other cities, including Ningbo (population 4.2 million) and the capital Beijing (22 million) had begun implementing limited restrictions to curb the spread of the virus. Again, at that point, there had been hopes of a softening in the zero-COVID approach, stoked by the publication in the second week of April by the Chinese Center for Disease Control and Prevention (CCDC) of a guide that outlined measures for quarantining at home. These measures seemed to indicate the possibility that people suffering from very mild symptoms or none at all, but having tested positive for COVID, might be able to quarantine at home rather than having to go to centralized state-run facilities to do so. Hopes that such measures might be introduced, however, were also dashed when the CCDC in a later clarification simply reiterated the previous set of strict policies. 

At that point, the bearish effect on global crude oil prices of the ‘China COVID’ factor was highlighted by OPEC in its report wherein it cut its global oil demand forecast  for 2022 by 480,000 barrels per day (bpd). At almost the same time, the same reasoning was given by the International Energy Agency (IEA) in the lowering of its global demand outlook for 2022 by 260,000 bpd. Even then, with Brent crude around the US$110.00 per barrel (pb) level, and pervasive talk of a potentially bullish-for-prices ban on Russian oil in Europe whistling through the markets, the IEA further warned that even though crude oil prices had come back down from recent highs they still: «Remain troublingly high and are a serious threat to the global economic outlook.» These actions and comments were made even before China stepped up its counter-COVID programs, with the end of April seeing announcements of mass testing for the virus being rolled out across Beijing, and other cities, including Hangzhou (population 12.2 million). By the onset of May, some analysts had calculated that the effect of ongoing lockdowns in China was reducing crude oil demand from the country by around one million barrels per day, with no indication of when or how this decline would end. Related: World Sees First Global Energy Shock: World Energy Council

Even before the transmission of COVID surged in mid-March, several major banks had regarded China’s 2022 economic growth target of ‘about 5.5 percent’ as too ambitious and the big data releases in April showed they were right. April’s official Purchasing Managers’ Index (PMI) – the key indicator that shows the state of the country’s manufacturing activity (with a reading above 50 showing an expansion and below 50 marking a contraction) came in at just 47.4 for the month, the lowest level since February 2020. China’s own National Bureau of Statistics (NBS) senior statistician, Zhao Qinghe, stated that: «The production and operation of… enterprises have been greatly affected [by COVID-related actions].»

Late last week, leading independent global economic and investment strategy research house TS Lombard (TSL), told Oilprice.com that it believes that China’s economy will likely contract this quarter and slashed its full-year 2022 China economic growth forecast to just 3.3 percent (although it thinks that for political reasons the official report from Beijing will be of 2022 economic growth close to 5.0 percent). Although the current Omicron wave of COVID appears to have peaked and the number of areas classified as high/medium risk has fallen in recent days from their recent highs, it remains the case that mobility remains low and stimulus measures are less effective under zero-COVID conditions and structural headwinds, according to TSL. «Beijing is firmly committed to ‘zero-COVID’, making further lockdowns almost inevitable during the remainder of 2022,» Rory Green, head of China and Asia research at TS Lombard, in London, told Oilprice.com last week. «Healthcare limitations, including the low vaccination rate and insufficient numbers of hospitals and staff, combined with politics ahead of the Q4/22 Party Congress – Xi is closely associated with current COVID policy – make an ending of strict COVID restrictions unlikely in the next nine months,» he said. 

It is true that China bounced back quickly and strongly from its previous major outbreaks of COVID up to 2020 but it is now harder for it to recover than it was back then. «Two years ago China bounced back from the initial Wuhan lockdown thanks to very strong external demand, limited trade competition, a property boom, and a relatively less infectious COVID strain but in 2022, diametrically opposite conditions apply,» underlined Green. «We expect China to recover slowly from the current Omicron wave, particularly as stimulus multipliers are lower and although a large infrastructure push is underway and monetary policy will continue easing, it remains the case that mobility restrictions, consumer confidence, and wage growth all make stimulus less effective,» he concluded. 

By Simon Watkins for Oilprice.com

More Top Reads from Oilprice.com:

Citi: Soaring Energy Bills Raise Chances Of Windfall Taxes In Europe How Will NATO’s Nordic Expansion Impact Georgia? What Will It Take For Hungary To Agree On A Russian Oil Embargo? Download The Free Oilprice App Today
LINK ORIGINAL: Oilprice

Entornointeligente.com