China’s oil demand continues to recover from pandemic lows, but despite positive forecasts by international forecasting agencies, oil prices may not see major gains as a result
Last week saw several worrying signs about China’s post-COVID-19 economic recovery.
The IEA does not stress that the current economic rebound in China may not be like any other that has gone before.For many years now, the state of China’s economy has been one of the most important determinants of the oil price. The vast disparity between China’s oil needs to power its economy on the one hand, and its lack of oil reserves on the other, meant that it almost single-handedly created and sustained the commodities ‘supercycle’ seen over various extended periods from the early 1990s.
This thematic analysis broadly accords with the views of tried-and-trusted leading China analysts exclusively spoken to by in recent years – but there is a catch that are two points that the IEA has not stressed. It is certainly true that a return to greater travel by all methods has pushed up China’s oil demand, but there is a limit to how far this can continue to do so. Positively for growth as well were further signs that China’s long-beleaguered property sector might be improving slightly.
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