National Bank of Canada’s (NBC) Jocelyn Paquet analyzes how China’s sharp reduction in petroleum imports helped offset the Middle East supply shock and limit Oil price gains. The July rebound in Chinese imports is highlighted as historically large in percentage terms. Paquet stresses that future trends in Chinese demand will be as important as Middle East developments for determining global energy prices.
China’s imports and global oil pricing
“For there is no doubt that the reduction of no less than 5 million barrels per day (or 41.4%) in China’s petroleum oil imports between March and June is one of the main reasons that has helped keep prices under control.”
“Combined with the release of strategic reserves, this reduction has made up for the global shortfall and kept shortages in other countries to a minimum.”
“But just as the decline in Chinese demand has helped cap prices, a potential recovery could have the opposite effect in the future if the Strait were to remain closed for an extended period.”
“Imports of petroleum products indeed rose by 1.2 million barrels per day during the month (or 22.1%).”
“Granted, it is difficult to know whether this rebound will continue in the coming months—China could theoretically continue to draw on its reserves and keep its import levels low for several more months—the fact remains that trends in Chinese demand will play a role just as important as developments in the Middle East in determining future energy prices.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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