China’s oil demand is now expected to decline this year compared to 2021, due to weakening economic growth with the extension of fresh COVID-related lockdowns, according to Standard Chartered.
Demand prospects have further weakened in the world’s top crude oil importer over the past week, analysts at Standard Chartered Global Research wrote in a note dated May 3.
Weak macroeconomic data and the lockdowns have prompted the bank to revise down its forecast for China’s oil demand in 2022 from growth of 78,000 barrels per day (bpd) to a decline of 82,000 bpd.
Last month, the start of strict lockdowns in Shanghai and other cities led to the worst reading of China’s factory and services sector activity since February 2020, at the onset of the pandemic.
Also on Tuesday, Fitch Ratings cut its forecast for China’s 2022 economic growth to 4.3% from 4.8% amid COVID outbreaks and the Chinese zero-COVID policy in ordering lockdowns.
Commenting on China’s oil demand prospects for this year, Standard Chartered’s analysts wrote in the Tuesday note:
“Other estimates still show strong China demand growth (for example, the OPEC Secretariat forecast is growth of 480kb/d in 2022), and we think consensus estimates are likely to fall sharply in coming months.”
Both OPEC and the International Energy Agency (IEA) cut global oil demand growth estimates for 2022 in their latest reports published in April, citing China’s slowdown. OPEC slashed its demand growth estimate by nearly 500,000 bpd on the back of lower expected global economic growth with the Russian war in Ukraine and the return of COVID lockdowns in China. The IEA, for its part, cut its 2022 global demand outlook by 260,000 bpd to reflect the return of severe lockdowns in the world’s top oil importer.
Ahead of the OPEC+ meeting on Thursday, May 5, Standard Chartered said “we expect the current unwinding of production cuts to continue as per the agreed schedule, with once again limited market commentary being provided by ministers”.
By Tsvetana Paraskova for Oilprice.com
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