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China’s service sector grew at an accelerated pace in May, according to the latest reading of the Caixin PMI index, which stood at 57.1, Reuters reported.
This is a very different reading from the official one, which came out last week and showed an expansion of 54.5 for May, down from 56.4 in the previous month. The difference between the two could be explained by the different survey sizes of Caixin PMI readings and official PMI readings.
Despite strong service sector growth, manufacturing activity remains a problem because it has been contracting for two months in a row, according to the latest figures. As manufacturing activity shrinks, so do expectations of a further increase in oil demand for the world’s biggest importer.
It could be those manufacturing activity figures that limited the rise in crude oil prices following the Sunday OPEC+ meeting where Saudi Arabia pledged an additional production cut of 1 million barrels daily beginning in July.
Even with a less smooth recovery, China’s crude oil demand is on the rise. In April, according to the latest figures from Energy Intelligence, this demand hit a record high of 16 million barrels daily.
This happened only a month after it exceeded 15 million bpd for the first time, Energy Intelligence noted in its report. The monthly increase in demand stood at 5% as refiners took advantage of healthy margins and an ample supply of discount Russian crude.
On an annual basis, the April demand figure was 26% higher but April 2022 was marked by Covid-related lockdowns that sapped normal demand.
An improvement in service sector activity could mean further demand growth potential from sectors such as travel and tourism.
Meanwhile, China’s oil imports are expected to have picked up, too. For May, these are seen at 11.96 million bpd, up from 10.96 million bpd in April, though lower than the three-year high of 12.37 million bpd recorded for March.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com