Prof. ST Hsieh
Director, US-China Energy Industry Forum
January 24, 2023
Clearly, China’s economy matters to the world. China has been the global economic engine for the past decade and it remains so for the near future: “the economic growth in China has been and will continue to be a key factor in global oil demand.” Despite the efforts by the US to isolate China from the “developed economy club,” it could be a disaster for the global economy if China’s economy crashed by any reason.
COVID-19 global pandemic injured every economy for three years already, it is time to focus on joint economy recovery. At least, the developed economies must manage to avoid recessions.
Unfortunately, most of the developed economies in Europe are bogged down by the war in Ukraine. They are struggling to attain “energy security” without Russian energy. But many of their not so smart “policies” are against market economy principle with the risk of causing global energy market instabilities.
China Is Still The Biggest Driver Of Oil Prices
Sun, January 22, 2023 at 4:00 PM PST
Oil prices settled on Thursday at their highest level since December 1 as the market is turning bullish on China’s oil demand this year.
The Chinese reopening is set to drive oil demand growth and push oil higher if most of the developed economies manage to avoid recessions, analysts say.
As China reopened its borders in early January, authorities issued a massive batch of allowances for independent refiners to import crude oil.
Over the past few days, the key driver of oil prices was the Chinese reopening and the improved outlook on Chinese demand due to said reopening. OPEC and the International Energy Agency (IEA) said in their respective monthly reports this week that the prospects of global oil demand were improving thanks to the Chinese exit from the ‘zero Covid’ policy.
China’s reopening is set to drive global oil demand to a record high of 101.7 million barrels per day (bpd) this year, up by 1.9 million bpd from 2022, the IEA said in its report, raising its demand growth estimate for 2023 by 200,000 bpd from 1.7 million bpd growth expected in December.
“Two wild cards dominate the 2023 oil market outlook: Russia and China,” the IEA said in its Oil Market Report.
“China will drive nearly half this global demand growth even as the shape and speed of its reopening remains uncertain.”
OPEC also expressed more optimism about Chinese oil demand and the global economy this year in its Monthly Oil Market Report (MOMR).
China’s reopening is set to push demand higher, and “In addition, China’s plans to expand fiscal spending to aid the economic recovery is likely to support oil demand in manufacturing, construction and mobility,” OPEC said.
Globally, economies look more resilient than previously expected, the cartel said.
“The global momentum in 4Q22 appears stronger than previously expected, potentially providing a sound base for the year 2023, especially in the OECD economies. The 2022 growth in both Euro-zone and US has surpassed previous forecasts,” OPEC noted.
Moreover, the U.S. looks to have more chances to avoid a recession this year.
“Upside potential may come from the US Federal Reserve successfully managing a soft landing in the US. This is the most likely outcome, given the expected slowdown in inflation and the sufficient underlying demand dynamic,” according to the organization.
Fears of recession may have subsided, but the oil market continues to react with selloffs to every weak economic data point from the United States, Europe, or China.
Nevertheless, market sentiment has turned bullish on China over the past two weeks, which resulted in rising oil prices. This highlights the fact that the Chinese economy and oil demand will continue to drive oil markets this year, alongside economic performance elsewhere, the extent of Russian oil supply losses, and the policy of the OPEC+ group to balance the market and support prices.
By Tsvetana Paraskova for Oilprice.com
Oil’s bull story for 2023 is China’s reopening, but that could be derailed if Beijing can’t stay the course on its retreat from zero-COVID policy, RBC’s Helima Croft says
Tue, January 24, 2023 at 10:49 AM PST