Oil Demand Set To Climb As China’s Economy Finally Rebounds

China’s economy appears to be leaving behind the early faltering of the reopening, with manufacturing, construction, and export orders rebounding sharply in February, in a sign that the world’s top crude importer could soon start seeing a jump in oil demand.

The Chinese manufacturing purchasing managers’ index (PMI) jumped to 52.6 in February from 50.1 in January, data from China’s National Bureau of Statistics showed on Wednesday. The surge in factory activity was the fastest in over a decade—the highest figure since April 2012. 

The index for non-manufacturing sectors, including construction and services, also jumped, signaling an overall expansion of the Chinese economy in February and possibly a faster-than-expected rebound after the reopening from the ‘zero-Covid’ policies which the country ditched at the end of last year.

The Caixin China General Manufacturing PMI, compiled by S&P Global, also showed a rebound in February and signaled a return to more normal business conditions. This, in turn, raised business confidence of Chinese manufacturing firms to a 23-month high, S&P Global said.

Analysts warn that the big monthly jump in the Chinese manufacturing and non-manufacturing indicators could be the result of a low base of comparison in January and pent-up demand following the reopening. Nevertheless, some economists say the return to normal conditions could happen sooner than expected.

Last month, the International Energy Agency (IEA) said that global oil demand was set to increase by 2 million barrels per day (bpd) this year, pushed up by growth in Chinese consumption after the reopening.

In its closely-watched Oil Market Report, the IEA raised its 2023 global oil demand growth estimate by 100,000 bpd from the previous month’s forecast. China’s resurgent oil demand – with growth seen at 900,000 bpd this year – and the rest of the Asia-Pacific region will dominate global growth, according to the IEA.

“China accounts for nearly half the 2 mb/d projected increase this year, with neighbouring countries also set to benefit after Beijing ditched its zero-Covid policies,” the IEA said.

By Tsvetana Paraskova for Oilprice.com

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