China’s National Bureau of Statistics released monthly data on Wednesday showing that factory activity contracted at a steeper pace in November versus October as lockdowns amplified to deal with rising COVID case numbers.
In November, China’s manufacturing sector activity (PMI) fell to 48 on the official index, down from 49.2 in October for the second consecutive month of downward movement. As a point of comparison, an index point of 50 is positive and suggests expansion and anything lower indicates contraction.
Combined November PMI for manufacturing and non-manufacturing was 47.1, down from 49 in October.
November’s manufacturing data is the lowest since April.
The declining manufacturing activity comes amid a surge of new COVID cases, reaching 40,000 new cases daily on Tuesday, and an accompanying wave of new lockdowns that have led to extraordinary protests.
On Wednesday, in a sign that Beijing may be starting to crack under the pressure of the public to loosen stringent lockdown rules, curbs on movement were slightly eased in two cities–the port city of Guangzhou and Chongqing, Reuters reported.
The easing of COVID lockdown restrictions followed clashes between police and protesters in Guangzhou on Tuesday.
Chinese oil demand has been weighing on oil prices, causing a 4% plunge in prices on Monday before paring those losses by Wednesday.
Wall Street seems to largely believe that by next year, China will reopen and demand will skyrocket, leading to considerably higher oil prices.
“Oil is starting to get its groove back and it looks like both supply and demand drivers could turn bullish for crude,” Ed Moya, senior market analyst at Oanda Corp, told Bloomberg on Wednesday. “If China’s Covid rules are slowly eased and OPEC stays the course, crude prices could rally another 5-10% here.”
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com