Covid easing restrictions in China isn’t enough to save the oil market

The sentiment in the oil market has been particularly gloomy this year. Only China was able to dispel the clouds hanging over oil prices.

According to some estimates, one in six barrels of oil in the world is consumed by China. However, for many months, the country was under the pressure of Covid restrictions implemented in order to reduce cases to zero. Finally, the restrictions have been loosened, and there is hope for an increase in demand.

Nevertheless, it’s worth remembering that there is a significant difference in oil consumption between China and other countries. China is much more interested in industrial raw materials such as naphtha and bitumen. Transport fuels, on the other hand, have a much smaller share of consumption.

One obvious consequence of the Covid restrictions was a decline in the production of diesel and jet kerosene. In contrast, some other products were flourishing at that time along with increasing exports. That’s why even if all covid restrictions were instantly removed, demand would hardly recover in early 2023. Along with changes in China’s domestic conditions, an improvement in global growth is needed for recovery.