The Energy Report: Will China’s Economic Troubles Hurt Oil Demand?

Ongoing problems in the Chinese economy have hurt their aggregate demand. Yet, despite these economic headwinds, there appears to be more signs that their demand for oil will exceed recently dampened expectations and could be a price driver at a time when global oil demand is already most likely utilizing daily supply.

Reuters reported last week that “China’s crude oil imports could rebound 6% to 7% this year, reversing the rare 2021 dip as buyers step up purchases for new refining units and rebuild inventories. low, analysts and oil company officials said. Robust demand from China, which accounts for a tenth of global crude trade, would help support global oil prices, keeping supplies tight amid forecasts of crude prices surging to $100.00 a barrel or more.

Saudi Arabia seems confident enough in Chinese oil demand to raise its prices. Reuters reported that Saudi Aramco (SE:) raised prices for all grades of crude it sells in Asia in March from February, in line with market expectations. They raised its March price for its Arabian light crude oil for Asian customers by 60 cents a barrel from February, at a premium of $2.80 a barrel to the Oman/Dubai average, Aramco said on Saturday. . The producer was expected to raise the March price of the flagship grade to Asia by 60 cents a barrel, according to a Reuters survey of seven refining sources in late January.

Oil is enjoying some supply relief following reports that Libya’s oil export terminals have reopened. According to Oil Minister Mohamed Oun of the UN-backed National Unity Government, Libya’s oil production is 1.17 million barrels of oil per day.

Price caps don’t work, but governments keep trying them anyway. Reuters reports that Japan is expected to increase its gasoline subsidy for petroleum distributors to 5 yen ($0.04) a liter for the week starting Thursday, a government source told Reuters, hitting a cap for the temporary program aimed at mitigating a sharp increase in fuel. prices. Fuel prices jumped as crude oil prices hit seven-year highs on concerns over tight global supply and potential supply disruption amid political tension in Eastern Europe . The increase is the third consecutive weekly hike in Japan since the emergency program launched late last month to compensate oil wholesalers for their costs, in an effort to rein in prices and possibly keep retail rates low. . Good luck. That should work just as well as Biden’s attempts to cool gas prices.

Reuters also reports in an exclusive that “the Biden administration is considering a proposal from Chevron (NYSE:) to allow the U.S. oil major to accept and trade shipments of Venezuelan oil to recover outstanding debt,” four said. people close to the discussions. Chevron representatives have held at least one high-level meeting in recent months with U.S. diplomats as well as Venezuelan opposition envoys, according to two of the people. They described it as a milestone in the company’s year-long lobbying efforts to get a change to its operating license in Venezuela, according to Reuters. From the perspective of American consumers, it would be good news if Chevron could get their hands on Venezuelan oil. American refiners were built for this heavier oil and much of Venezuela’s oil was filled by Russia. It is also filled with oil from the Canadian tar sands.

Russian oil continues to flow to the United States and the fact that the so-called impending invasion of Ukraine has not happened has relieved some oil sales. Today, Russian President Vladimir Putin is meeting French President Emmanuel Macron in an attempt to ease tensions.

Yet the fundamentals of this market are very tight with little margin for error. Oil is overbought, so we have to be on our guard. Breaks must be purchased and kept on these hedges.

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Felix J. Dixon