Oil demand in the world's top oil importer, China, has rebounded to pre-coronavirus levels, Bloomberg reported on Monday, citing sources with inside knowledge of China's energy sector.
China was the first to go into lockdown after the COVID-19 virus emerged in Wuhan, but it was also the first country to exit lockdown. Demand for oil and fuels has been rising over the past month as people return to commuting to work, preferring their own vehicles to public transportation.
According to Bloomberg's sources, China's gasoline and diesel consumption are already back to the pre-virus levels-a bullish sign for the oil market, which is looking at China for clues about when demand in the rest of the world could return to some form of normality.
In February and early March, in the full lockdown and extended factory shutdowns and holidays, China's oil demand had plunged by around 20 percent.
Over the past few weeks, more and more encouraging signs have emerged that China's demand is recovering and helping lift global oil demand from the lows of the 'Black April.'
Chinese refineries increased their run rates by 11 percent in April as the country began to emerge from the months-long lockdown prompted by the coronavirus outbreak that became a pandemic. At 13.1 million bpd, the April run rates were also higher than the average for the same month in 2019.
China's crude oil imports jumped in April to about 9.84 million bpd as demand for fuels began to rebound and local refiners started to ramp up crude processing, according to Chinese customs data cited by Reuters.
Recovering demand, not only in China but with signs of more demand ahead as U.S. states and major European economies continue to ease lockdowns, plus accelerated production cuts from OPEC+ and North America, were driving U.S. oil prices up by nearly 10 percent early on Monday - WTI Crude traded at $33.16 a barrel at 11:42 a.m. EDT, up by 12.67 percent on the day, a day before the expiry of the June contract.
By Tsvetana Paraskova for Oilprice.com
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Comments
China is already bouncing back extremely quickly in all sectors with projections already abound that China could grow at 6.8% in 2021 compared with 6.1% in 2019. This development will give a huge impetus to an oil market bereft of good news and may also prevent oil prices from sliding downward.
Despite the coronavirus outbreak, China’s crude oil imports in the first four months of 2020 averaged 10.11 mbd and were slightly higher than the same period of 2019. Moreover, China has been taking advantage of super-low oil prices to expand its strategic oil reserves before prices rise again. It is also stocking up on cheap LNG.
It has been reported by Bloomberg news that 117 very large crude oil carriers (VLCCs) are on their way to Chinese ports bringing some 234 million barrels of crude oil bought in April when oil prices were around $25 a barrel or less. This could save China an estimated $8.2 billion as a price difference between $60 in January to $25 in April.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London