Concerns about Chinese demand continue to scare the oil markets

Crude oil prices fell on Tuesday ahead of official inventory data as traders continue to focus on demand risks in China.

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Graph of the week

China’s recovery will take months if not years

– Despite a week-long vacation that usually supports domestic consumption in October, last month’s Chinese data provided a gloomy outlook for fourth-quarter demand amid rising Covid cases in the country.

– Positive cases (already around 16,000 per day) are on par with levels seen in late April, when Shanghai went into total lockdown, prompting market watchers to further reduce Chinese GDP growth to 3.0-3. 5%.

– The purchase of Chinese oil has yet to rise above the levels seen in the spring months of 2022 – even in October, exports to China were still only 9.4 million barrels per day according to Kpler data, up 6% less on an annual basis.

– The Chinese economy is still reeling from the impact of the blockade, with October industrial production growing slower than expected (5% year-on-year increase) and retail sales declining for the first time since May 2022.

Market Operators

– Give new life to the chip production market, Berkshire Hathaway (NYSE: BRK) revealed a $ 4.1 billion stake in Taiwanese company TSMC (TPE: 2330), causing the company’s shares to increase by 20% in the past two days.

– Having already committed $ 6 billion to an electric vehicle battery plant in Indonesia, a Chinese battery manufacturer CATL (LEI: 300750) is to establish a $ 2 billion electric vehicle fund in the Asian country together with its sovereign wealth fund.

– The Australian frontier oil company Invictus Energy (ASX: IVZ) more than tripled after the company announced it hit gas with its wild Mukuyu-1 well in Zimbabwe, a discovery that opens the border.

Tuesday 15 November 2022

The upbeat sentiment that swept through global markets last week following news of China opening up and easing some of the coronavirus punitive measures in place previously, has once again given way to pessimism. It’s the same Beijing syndrome that oil markets have been developing over the past couple of years, picking up good news before they are shattered by another wave of COVID cases, this time around Beijing which is the epicenter of new cases. In addition to the IEA and OPEC’s forecasts of falling demand, demand concerns are making headlines again, pushing ICE Brent to $ 92 a barrel.

OPEC reduces output of increased demand reviews. In its latest monthly report, OPEC cut its oil demand growth forecast in both 2022 and 2023 by 100,000 barrels per day, anticipating that in 2023, crude oil demand will increase by 2.24 million barrels per day. with risks shifted to the downside amid recession fears.

The Biden-Xi meeting fosters hope for a climate deal. In the first face-to-face meeting between United States President Joe Biden and Chinese President Xi Jinping since the first took office, the two decided to work together on climate goals even though in the Chinese communiqué the issue had a higher priority. low. Related: Russia’s oil production could decline by 1.4 million barrels per day in 2023

The United States starts India’s purchase of Russian crude oil. The US is happy that India buys all the Russian oil it wants, as long as it steers clear of Western insurance, finance and maritime services bound by the oil price cap imposed by the G7, the secretary said. to the United States Treasury Janet Yellen during a visit to India.

The IEA announces a reduction in diesel demand in 2023. With both sides of the Atlantic basin experiencing an unprecedented diesel contraction, the International Energy Agency expects diesel demand to decline slightly next year, after two consecutive years of growth totaling around 2 million. barrels per day.

Freeport GNL Delayed restart. The second largest LNG plant in the United States, Freeport LNG has not yet provided Texas regulators with a final repair plan after trying to get the liquefaction plants back by mid-November after a June 2022 fire and will see its reboot be pushed in the first quarter of 2023.

Five Iranian oil tankers lose their flag. The latest round of US Treasury sanctions against companies involved in Iranian crude oil shipments resulted in the loss of flags of five registered oil tankers in Djibouti and the Cook Islands, all currently active in Venezuelan waters.

The CPC terminal restarts as Kazakhstan sighs with relief. The Caspian Pipeline Consortium in southern Russia resumed operations at berth 1 after extensive repair work, finally allowing Kazakhstan to maximize its crude oil exports through the 1.3 million barrels per day pipeline.

Europe cannot let the French strike alone. Just a few days after the last French refinery stopped its strike, the BP workers went into action (NYSE: BP) The 400,000-barrel-per-day Rotterdam refinery has initiated trade union action to govern after unions failed to reach a new wage deal, making diesel problems in Europe even more risky.

US drillers are seeing Fracklog rise again. As reported by Bloomberg, US oil and gas companies have fractured fewer wells than they have drilled for the first time since June 2020, ending a series of 27-month dips in the DUC count and indicating a slowdown in production at due to the decline in well productivity.

Bearish fully stocked terminals for Asian LNG. Just as gas prices in Europe have started to rise in the wake of this winter’s first bad streak, Asia has turned decidedly bearish as LNG importers are experiencing high levels of stocks and tanks (especially in South Korea). pushing JKM prices to $ 25 / mmBtu.

LME refuses to ban Russian metal in 2023. The London Metal Exchange announced its decision not to ban Russian metal in its warehouses pending the future, arguing that “a substantial part of the market still relies on it” and that there has been no indication of an increase in prices. stocks avoided.

Improved Chinese real estate increases iron ore. In a context of improving market sentiment on the Chinese residential real estate sector, prices of spot iron ore delivered to North China have rebounded from the three-year low of $ 79 / mt recorded at the end of October to around $ 92 / mt. lately.

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

By Tom Kool for Oilparmi

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