China quickly removes Covid restrictions

Severe Covid-19 restrictions in China have had a strong impact on the country's economy by reducing demand for oil and its derivatives in particular. For most of the year, Chinese refineries received 1.8 million fewer barrels of oil per day than in the period of 2015-2019 on average. Production of jet fuel declined by 0.6 million barrels per day compared to 1.1 million barrels in 2019. These figures demonstrate the pandemic’s negative impact on oil demand. They also show how much demand might change when China manages to stabilize the Covid-19 situation. China has already lifted its restrictive Covid Zero policy, and the only question is how quickly it’ll recover.

Reuters analyst John Kemp suggests that China’s recovery will lead to an increase in oil demand by more than 1 million barrels per day. However, before that, the country will have to face a massive outbreak of Covid cases after the removal of restrictions, which will first reduce energy consumption. According to Kemp's forecast, there are two possible scenarios. The first assumes an uncontrollable surge of Covid cases, which will last for about 2–4 months. While the second assumes that the situation will be more controllable and will last for about 3–6 months. The timing may vary, but the general trend for recovery is already set.