Economic Concerns Diminish Crude Oil Demand Growth Estimates
- 23-Nov-2022 2:11 PM
- Journalist: Jacob Kutchner
The International Energy Agency (IEA) cited several "headwinds" and an exceptionally competitive diesel market in its monthly oil market report. According to the IEA, the continuously underperforming Chinese economy, the energy crisis in Europe, the widening product fissures, and the high value of US currency are all negatively impacting global Crude Oil demand. The effects of the recent strikes at French refineries were also noted by the IEA, which stated that approaching EU embargoes on Russian oil and a ban on marine services "will add further pressure on global Crude Oil balances, and, in particular, on diesel markets that are already unusually tight."
China's Crude Oil demand is more likely to decline further due to the relaxation, which would lead to a spike in COVID-19 cases during the winter, when COVID-19 is at its height, and more dispersed lockdowns or movement restrictions under the zero-COVID policy. Apart from Turkey, China, and India, no significant purchases of crude oil from Russia have occurred, despite substantial discounts. The pressure should be reduced by further trade rerouting, but a lack of tankers is a severe issue, especially for ice-class ships that must load out of Baltic ports in the winter.
Since millions of people are still under lockdown and the zero-COVID policy is still in effect, Crude Oil demand may stay sluggish through November and December. After the Lunar New Year celebrations are done and political reorganization at the National People's Congress is through, demand rebound would likely occur in March. Leading state-owned companies' top Crude Oil traders said they were thinking about reducing their purchases of December-loading cargoes since these new regulations could increase COVID-19 instances, which would then reduce demand.
According to ChemAnalyst, the price of Crude Oil in the global market is not likely to improve during the rest of the year as the demand is not expected to rise anytime soon. The rising Covid cases in China have decreased the demand for Crude Oil in the country, which is the largest consumer. Despite relaxing the Covid-19 restriction, the demand scenario is poor, ultimately easing the demand for Crude Oil in the global market.