China’s Oil Demand Growth Threatened by Latest Covid Outbreak

As China resumed business as usual after the latest round of lockdowns, an “explosive” outbreak in a Beijing district could derail that.

“The recent outbreak…is highly explosive in nature and wide-ranging in scope,” a Beijing municipal government spokesperson said over the weekend, as cited by Reuters.

The outbreak was not particularly large in terms of numbers, with 166 cases identified so far, but China’s zero Covid policy makes restrictions likely as the country seeks to minimize infections. Mass testing is planned for this week in the district where the outbreak occurred.

Last week a come back The shutdowns in Shanghai have weighed on oil prices, suggesting it may still be some time before China’s economy returns to normal. On the other hand, the news that China’s oil imports in May were 12% higher than a year earlier could potentially support prices, although it may not be a sign of an upturn. real increase in demand.

“This does not indicate that demand for oil is increasing. Instead, China likely acted opportunistically, buying crude oil from Russia at a price significantly below the world market level in order to replenish its inventories.” , said Karsten Frisch of Commerzbank. Told Reuters last week.

Chinese authorities remain cautious about further spread.

“At present, the risk of further spread still exists. The most urgent task at the moment is to trace the source of the cluster and also to manage and control the risks,” the spokesperson for the Beijing city government, Xu Hejian. Told media, quoted by Reuters.

If a further spread of infection were to occur, it would likely have a negative effect on oil prices, providing such urgent relief, although the magnitude of this effect remains an open question in the face of tight global supplies and little chance of significant production growth anywhere. .

By Irina Slav for

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Felix J. Dixon