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China reported economic growth of 3.9 percent for the third quarter of the year, which was higher than analysts expected and might inject some fresh optimism into oil markets with regard to demand.
Covid lockdowns and other restrictions in China have been among the main natural caps on oil prices, due to the country’s size and weight as an oil importer. The impact of these restrictions on business activity and fuel demand has been unequivocally negative, yet the latest economic data suggests it has not been as severe as feared.
Still, the third-quarter growth figure remains below the government’s target of 5.5 percent, CNBC noted in a report on the news. Still, it was a substantial improvement over the second quarter, when GDP growth stood at 0.4 percent.
Chinese demand has been watched closely by oil market players and has become one of the few swing factors for prices. Lately, demand projections have given rise to optimism, which has pushed oil prices higher, albeit only moderately. Headwinds remain strong, chief among them the continued, and rather unsurprising fear of a global recession.
Yet Beijing’s Covid policies have injected a lot of uncertainty in the country’s economic outlook. These policies are among the strictest in the world and have caused a slowdown in economic growth that some expect to last for a while yet.
Economic growth for this year is seen at 2 percent, which is a lot lower than the average annual rate of 6 percent that China maintained over the past ten years. And slower growth would mean slower oil demand growth for what is now the largest oil importer in the world.
Over the short term, however, the outlook appears to be relatively positive, with all the implications that would have for oil prices, with investment in infrastructure in the year to date rising by 8.6 percent and industrial production expanding by6.3 percent, per the latest economic data.
By Michael Kern for Oilprice.com
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Michael Kern is a newswriter and editor at Safehaven.com and Oilprice.com,