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China's Covid Crisis Will Ensure Oil Price Volatility

While fluctuating back and forth with fears of global recession and uncertain U.S. economic data, China’s economic reopening remains a significant key to demand determinations; yet, no one can get a handle on the severity of the country’s Covid crisis and what it might mean for future demand.

The problem, as we see it, is two-fold: First, there is no accurate data coming from Beijing. Second, while the media loves to actually blame the surge in new cases on the reopening–despite the fact that Western media likewise had harshly criticized Beijing for failing to reopen previously–logic dictates that the reopening itself was not the primary cause of the surge.

With regards to the data issue, oil traders cannot successfully evaluate future demand with any certainty because we have no idea what actual Covid numbers look like. Yes, we can look at manufacturing (PMI) data for an idea; however, that comes at the end of the month and gives us only what we already know based on demand for the same month. Getting out in front of it is difficult. China’s manufacturing activity declined for three months in a row as of the December data…

We have varying numbers to digest here. A UK-based health data firm says China has witnessed over 33 million new Covid cases from December 1st to December 20th (along with over 190,000 deaths). Western news agencies reported what was ostensibly data leaked from China’s National Health Commission…


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