Shanghai is expected to return to more or less normal life as of June 1, the deputy mayor of China’s financial hub with 25 million residents said on Monday—and a reopening could incentivize oil demand in the world’s top crude importer after weeks of depressed fuel consumption weighing on global oil prices.
As of June 1, Shanghai authorities are set to allow a broad reopening with gradual increases in domestic flights after saying that 15 out of 16 districts have eliminated COVID infections outside areas of quarantines, according to Shanghai’s Deputy Mayor Zong Ming, as quoted by Reuters.
China’s “zero COVID” policies, with immediate lockdowns ordered when cases are being detected, have been weighing on global oil demand in recent weeks and wiping some of the price gains from the Russian invasion of Ukraine.
Over the past few weeks, analysts, agencies, and investment banks have revised down their global oil demand growth forecasts for this year mostly due to two factors—the fallout from the war in Ukraine on the global economy and the return of Chinese lockdowns—the strictest curbs on people’s movements since the onset of the pandemic in February and March 2020.
Slower global economic growth, China’s fight against COVID, and the Russian invasion of Ukraine prompted OPEC last week to slash for a second month running its global oil demand growth estimate for 2022. OPEC’s second-quarter demand estimate was revised down by a massive 670,000 bpd to 98.44 million bpd, but average global oil demand is set to exceed the 100 million bpd mark in the third and fourth quarters, with Q4 demand seen at 102.64 million bpd, per the cartel’s latest Monthly Oil Market Report (MOMR).
At the start of the second quarter, in April, Chinese refiners slashed crude processing by 11 percent annually due to weak demand. At 12.61 million barrels per day (bpd), crude throughput in China last month was at its lowest since March 2020, and compares to 13.8 million bpd in March 2022 and 14.09 million bpd in April 2021, per Reuters estimates.
By Tsvetana Paraskova for Oilprice.com
More Top Reads from Oilprice.com:
- Recession Fears Loom Large Over Bullish Oil Market
- China’s COVID Lockdowns Force Aramco To Slash Oil Export Prices
- Six Years Late And 250% Over Budget: Georgia’s Newest Nuclear Plant