Concerns about Chinese demand continue to spook oil markets

Crude oil prices fell ahead of official inventory data on Tuesday as traders remain focused on demand risks in China.

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chart of the week

China’s recovery will take months, if not years

– Despite a week-long holiday that normally supports domestic consumption in October, last month’s China data did so provided a bleak outlook for fourth-quarter demand amid rising Covid cases in the country.

– Positive cases (already around 16,000 per day) are at levels seen at the end of April, when Shanghai went into full lockdown, prompting market watchers to cut China’s GDP growth even further to 3.0-3.5%.

– Chinese oil purchases are yet to rise above levels seen in the spring months of 2022 — even in October, exports to China were still just 9.4 million b/d, down 6% year-on-year, according to Kpler data.

– China’s economy is still suffering from the effects of the lockdown, with factory production growing slower than expected in October (up 5% yoy) and retail sales falling for the first time since May 2022.

market mover

– Bringing new life to the chip manufacturing market, Berkshire Hathaway (NYSE:BRK) disclosed a $4.1 billion stake in Taiwan’s TSMC (TPE:2330), sending the company’s shares up 20% over the past two days.

– China’s battery maker has already pledged $6 billion for an EV battery factory in Indonesia CAT (SHE:300750) is to configuration a $2 billion electric vehicle fund in the Asian country along with its sovereign wealth fund.

– Australia’s Frontier Oil Company Invictus Energy (ASX:IVZ) after the company more than tripled announced it encountered gas with its Mukuyu-1 wildcat well in Zimbabwe, a border opening find.

Tuesday, November 15, 2022

The optimistic mood that swept global markets last week after news that China was opening up and easing some of the previously in place coronavirus tightening measures has given way to pessimism. It’s the same Beijing Syndrome that oil markets have developed over the past two years – picking up on good news before being crushed by another wave of COVID cases, this time around Beijing, which is the epicenter of new cases. In addition to lower demand forecasts from the IEA and OPEC, demand concerns are once again making headlines, pushing ICE Brent to $92 a barrel.

OPEC production cuts announced demand revisions. In its latest monthly report, OPEC cut its forecast for oil demand growth of 100,000 barrels per day in 2022 and 2023, with crude oil demand expected to rise by 2.24 million barrels per day in 2023, with downside risks amid recession fears are.

Biden-Xi meeting fuels hopes for climate deal In the first face-to-face meeting between US President Joe Biden and China’s President Xi Jinping since he took office, the two agreed to work together on climate goals, despite the issue being given a lower priority in the Chinese communique. Related: Russia’s oil production could fall by 1.4 million barrels a day in 2023

The US gives the green light to India’s purchase of Russian crude oil. The US is happy for India to buy as much Russian oil as it wants, provided it stays away from Western insurance, financial and shipping services, which are tied to the G7-imposed oil price cap. said US Treasury Secretary Janet Yellen on a visit to India.

IEA reports lower diesel demand in 2023 As both sides of the Atlantic basin experience unprecedented diesel pressure, the International Energy Agency notes forecasts Demand for diesel will decline slightly next year after two consecutive years of combined growth of about 2 million barrels per day.

Freeport LNG restart delayed. The second largest LNG facility in the US, Freeport LNG, has not yet provided Texas regulators have a definitive repair plan after trying to restart liquefaction plants through mid-November following a fire in June 2022, and will see the restart pushed back to the first quarter of 2023.

Five Iranian tankers lose their flags. The US Treasury Department’s latest round of sanctions against companies involved in Iranian crude oil shipments has resulted in five tankers being registered in Djibouti and the Cook Islands lose their flagsall are currently active in Venezuelan waters.

CPC terminal restarts as Kazakhstan breathes a sigh of relief. The Caspian Pipeline Consortium in southern Russia resumed operations at the single Pier-1 after lengthy repairs, eventually allowing Kazakhstan to maximize its crude oil exports via the 1.3 million b/d pipeline.

Europe cannot let the French beat them alone. Workers at BP were operating just days after the last French refinery called off its strike (NYSE:BP) 400,000 b/d Rotterdam refinery started a strike by the book after unions failed to strike a new collective agreement, making Europe’s diesel woes even more risky.

US Drillers See Fracklog Rise Again. As reported US oil and gas companies fracked fewer wells than they drilled for the first time since June 2020, according to Bloomberg.

Fully equipped terminals for Asian LNG bearish. Just as European gas prices started to rise after this winter’s first cold snap, Asia has been decidedly on the decline as LNG importers experience high inventories and tank tops (particularly in South Korea) pushing JKM prices down to $25/mmBtu.

LME refuses to ban Russian metal until 2023. The London Metal Exchange announced its decision not to ban Russian metal in its stockpiles, arguing that “a significant portion of the market still relies on it” and that there is no evidence of an increase in shunned stockpiles.

Improvement of China Real Estate mines iron ore. Spot iron ore prices were shipped to North China amid improving market sentiment in China’s residential real estate sector bounced off from a three-year low of $79/mt recorded in late October to around $92/mt recently.

South Africa’s power crisis is prolonged. With electricity generation in South Africa still 80% dependent on coal, the ongoing unprecedented series of blackouts and blackouts is expected to continue as the country lacks adequate renewable energy alternatives.

By Tom Kool for

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