China in three decade oil demand hit amid economic slowdown
China oil consumption is set to shrink by the greatest amount in three decades, driven by Beijing’s adherence to strict Covid-19 restrictions to tame the virus, the world’s energy watchdog said today.
Oil demand will drop around three per cent this year caused by economic activity taking a hit from Beijing’s zero-Covid tolerance policy, the International Energy Agency (IEA) has warned.
“A deteriorating economic environment and recurring Covid lockdowns in China continue to weigh on market sentiment,” the organisation said.
The world’s second-largest economy is buckling under the weight of a severe real estate crisis and businesses and households being ordered to stay at home.
Tough virus curbs are likely to result in Beijing officials missing their 5.5 per cent GDP growth target this year.
A slowdown among the world’s richest economies caused by soaring inflation hamstringing businesses and households has clouded the oil demand outlook.
Russia’s economy is likely to be squeezed by the European Union (EU) shunning oil exports from the country from December.
“The EU has so far largely maintained Russian diesel import volumes at around 600 kb/d, but from next February these volumes will need to be replaced by other sources,” the IEA added.
Global oil prices have surged after Moscow invaded Ukraine last February, driven by countries scrambling to find alternative suppliers, poor weather cutting renewable energy production and low storage capacity.
However, fuel prices have tumbled in recent months, curbing UK and US inflation, which dropped to 9.9 per cent and 8.3 per cent respectively in August.
Global oil consumption is set to jump two million barrels per day this year and a further 2.1m barrels per day next year, the IEA said, driven by an uptick in international travel.
The world’s two oil benchmarks – WTI and Brent Crude – both jumped on the IEA’s September oil report, each climbing nearly two per cent.
Oil prices surged after Russia invaded Ukraine
