China’s oil consumption is expected to jump by 800,000 barrels per day (bpd) this year to a record 16 million bpd, after Beijing abandoned the strict ‘zero Covid’ policy and re-opened its borders, a median estimate of 11 China-focused consultants polled by Bloomberg News showed.
Following the initial exit Covid wave after the strictest curbs were lifted, Chinese oil demand is set to rebound from the second quarter onwards, also raising global oil demand for this year, many analysts say.
Despite the fact that China’s crude oil imports in 2022 were slightly lower than the previous year, for a second consecutive year, crude imports in December rose by 4% annually for the third highest monthly purchases in 2022, data showed on Friday.
Despite the current Covid wave, China is preparing for the re-opening with the issuance of a huge batch of oil import quotas for its private refiners.
“Higher quotas support the view of recovering Chinese demand this year and the quicker-than-expected change in Covid policy means that the demand recovery could be more robust than initially expected,” ING strategists Warren Patterson and Ewa Manthey said this week.
Global oil demand in 2023 is expected to grow by around 1.7 million bpd, of which 50% will be driven by China, according to ING, which says “There could be some upside risk to this” forecast.
“As China’s infection rate slows post-Chinese New Year, we see domestic oil demand rebounding. As the population hits the roads and the skies, our expectation is Chinese oil consumption in 2023 will increase by around 1.0 million b/d, an impressive performance considering Q1 demand is likely to contract by 190,000 b/d,” Gavin Thompson, Vice Chairman, Energy – Asia Pacific, at Wood Mackenzie, said on Thursday.
“Look for a particularly bullish Q2, with China adding 1.36 million b/d over the same quarter in 2022, the strongest growth in over a decade (excluding the post-Covid bounce) that will support higher prices,” Thompson added.