China’s oil consumption is expected to jump by 800,000 barrels per day (bpd) this year to a record 16 million bpd, after Beijing abandoned the strict ‘zero Covid’ policy and re-opened its borders, a median estimate of 11 China-focused consultants polled by Bloomberg News showed.
Following the initial exit Covid wave after the strictest curbs were lifted, Chinese oil demand is set to rebound from the second quarter onwards, also raising global oil demand for this year, many analysts say.
Despite the fact that China’s crude oil imports in 2022 were slightly lower than the previous year, for a second consecutive year, crude imports in December rose by 4% annually for the third highest monthly purchases in 2022, data showed on Friday.
Despite the current Covid wave, China is preparing for the re-opening with the issuance of a huge batch of oil import quotas for its private refiners.
“Higher quotas support the view of recovering Chinese demand this year and the quicker-than-expected change in Covid policy means that the demand recovery could be more robust than initially expected,” ING strategists Warren Patterson and Ewa Manthey said this week.
Global oil demand in 2023 is expected to grow by around 1.7 million bpd, of which 50% will be driven by China, according to ING, which says “There could be some upside risk to this” forecast.
“As China’s infection rate slows post-Chinese New Year, we see domestic oil demand rebounding. As the population hits the roads and the skies, our expectation is Chinese oil consumption in 2023 will increase by around 1.0 million b/d, an impressive performance considering Q1 demand is likely to contract by 190,000 b/d,” Gavin Thompson, Vice Chairman, Energy – Asia Pacific, at Wood Mackenzie, said on Thursday.
“Look for a particularly bullish Q2, with China adding 1.36 million b/d over the same quarter in 2022, the strongest growth in over a decade (excluding the post-Covid bounce) that will support higher prices,” Thompson added.
By Tsvetana Paraskova for Oilprice.com
ADVERTISEMENT
More Top Reads From Oilprice.com:
- G7 Oil Price Cap About To Get More Complicated
- Global LNG Imports Hit A Record High In 2022
- 2023: Expect A Financial Crash And Major Changes In Global Energy Markets
That is why its return to the global oil market after it eased its lockdown promises to have a very positive and bullish impact on global oil demand and prices.
It is projected by China-focused consultants polled by Bloomberg that China’s oil demand in 2023 could hit a record of 16 million barrels a day (mbd) necessitating importing on average 12 mbd.
However, my own research sees China’s oil demand for 2023 rising to 17.10 mbd in 2023, 18.25 mbd in 2025 and 23.8 mbd in 2030 with crude oil imports hitting 13.20 mbd in 2023 and continuing to rise to 15 mbd by 2025 and 20.85 mbd by 2030. China’s dependence on oil imports will reach 77% in 2023, rising to 82% in 2025 and 87% by 2030.
OPEC+ projects that global oil demand will rise by 2.3 mbd in 2023. This means that global oil consumption is going to rise to 103.8 mbd. China is expected to account for 50% of demand growth in 2023 or 1.15 mbd,
One promising sign is China’s decision to raise the oil imports quota for private refiners in 2023 to 132 million tons of oil (968 million barrels) in 2023 compared with 109 million tons (799 million barrels) in 2022 or 21% higher. If we extrapolate this to 2023, then we could expect China’s crude imports to be 21% higher than in 2022.
Another sign is that Chinese authorities have approved exports of gasoline, diesel, and jet fuel of 18.99 million tons in 2023 compared with 13 million tons in 2022, an increase of 46%.
Based on these positive signs, Brent crude is projected to hit $100 a barrel in the first quarter or second quarters of 2023.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert