Recovering China Demand and Uncertain Supply Outlook Engulf Global Crude Oil Market

China: Crude Oil exports from the Middle East to Europe reached a weekly top of just under 500,000 b/d in January, easing a supply shortage that was anticipated prior to the ban on Russian imports and the G7's proposed price restriction.

Most of the world depends on China for a wide range of exports and may become vulnerable if China becomes overly dependent on the Middle East for power. The Organization of Petroleum Exporting Countries (OPEC )'s export limitations have prompted the United States to criticize Saudi Arabia's global Crude Oil market dominance. Moreover, reductions in oil production could jeopardize China's supplies. While the Chinese President may not support Saudi Arabia's decision to reduce Crude Oil production, China's significant reliance on OPEC oil necessitates maintaining strong relations with Crown Prince Mohammed bin Salman to secure its future oil supplies.

Due to a lack of pipeline infrastructure, China's acquiring Crude Oil from the Middle East, which primarily relies on oil ships to carry its petroleum, presents another vulnerability. Several nations have expressed disapproval of China's actions in Taiwan. Meanwhile, its oil tankers must go over the South China Sea, the Indian Ocean, and the Straits of Malacca. As a result, any sanctions or blockades imposed on cargo ships traveling to China could endanger China's supply of energy.

Most Middle Eastern refiners will not likely acquire Russian Crude Oil to process, but they might import Russian goods for re-export. Since Middle Eastern refineries are primarily built to process domestic Crude, paying for the shipment of Russian petroleum would be of little benefit. Regarding the processing of Russian Crude Oil, refiners in the region's non-oil-producing nations may have more options.

ChemAnalyst predicts that the price of Crude Oil will increase in the global market due to OPEC's decision to limit production this year, which will further support the trend of rising Crude Oil prices worldwide. As was already mentioned, the price cap on Russian crude exports adds to the increasing trend in Crude Oil prices worldwide.