Oil Market Reacts Positively to China’s Economic Growth and COVID-19 Policy Shift

The oil market received a boost on Tuesday as China’s annual economic growth data exceeded expectations and the country’s COVID-19 policies were relaxed.

Brent crude futures rose by 1.70% to $85.90 per barrel, while U.S. West Texas Intermediate crude increased by 0.59% to $80.58.

Despite a 3.4% decrease in China’s oil refinery output in 2022, crude oil imports rose 4% in December, leading to anticipations of a boost in transportation fuel demand during the Lunar New Year.

The Organization of the Petroleum Exporting Countries (OPEC) also shared positive outlook on the oil market, projecting that Chinese oil demand will rebound in 2023 due to the relaxation of COVID-19 restrictions and drive global growth. In its monthly report, OPEC forecasted a 2.2% increase in world demand, or 2.22 million barrels per day in 2023, which is unchanged from last month’s forecast. The report also highlighted that a stronger economy could lead to upward revisions in demand and support oil prices, which have risen in 2023 due to increased expectations of Chinese demand.

OPEC also expressed optimism about the global economy in 2023, despite expecting a slower growth rate compared to 2022. The report stated that Chinese oil demand is projected to grow by 510,000 bpd in 2023 and that plans to expand fiscal spending will also support demand. However, the report also warned that higher-than-expected inflation could lead to further monetary tightening by major central banks.

The oil market is closely monitoring the developments in China, which is the world’s largest oil importer and a major player in determining the global oil demand. The positive outlook on China’s economic growth and relaxation of COVID-19 measures is a sign of hope for the oil market which has been impacted by the pandemic.

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