Revival Of China’s Industrial Activities To Drive Oil Demand In 2023

Revival Of China’s Industrial Activities To Drive Oil Demand In 2023

February 18, 2023 0 By Wiley McDermott

The officials of the International Energy Agency (IEA) in their recent statement said that China will lead the oil market.

After the country has relaxed its Covid-19 control measures, the Chinese economy is likely to contribute to almost half of the industry’s oil demand in 2023.

China is also the largest consumer of oil and gas and also the largest importer of crude oil and natural gas. In addition to that China is also one of the top countries in terms of carbon emissions.

As China’s industry finally started to operate at full scale this could lead to an oil supply deficit for the second half of 2023.

As Russia is facing sanctions imposed by the U.S. over its invasion of Ukraine, oil production from OPEC is expected to decline significantly.

It looks crystal clear that through the first half of 2023, the global oil supply is exceeding the market demand.

But for the second half of 2023, the oil demand most probably will exceed the supply.

As the demand for oil surges with the flip of a hand, it looks like the supply deficit is very much on the cards.

Why The Demand for Oil Has Increased Suddenly?

This subtle increase in the oil demand comes from increased traveling and tourism and full-scale industrial production in China.

Recently China has lifted the lockdown as the country has relaxed its measures to deal with the spread of Covid-19.

Another key factor that is likely to force the high fuel demand is an increase in air travel, an increase in jet fuel consumption is about to take the center stage.

The global demand rebound has proved all the speculations and future analyses wrong about the consumption of oil in 2023.

Those investors who were previously careful about going big on oil investment will soon rush to invest in oil.

Russian Oil Production to Further Diminish

As of this writing, Russia’s economic condition is not good, the country’s funds are constantly shrinking as the U.S. has imposed sanctions on Russia.

Lesser financial capacity means Russia’s oil production capacity has been halted over the past one-and-a-half years since its invasion of Ukraine.

Now, the global oil industry is heavily relying on Gulf’s oil production, but it is quite obvious that Gulf’s oil production will not be enough to fulfill global oil demand.

IEA on the other hand also said that it remains ambiguous how the EU embargo and price ceiling regarding oil products will alter the trade flow.

IEA officials also said that going forward, Eurozone might be forced to ban the import of oil and gas from Russia.

But how feasible it would be for Europe to import oil and gas from the gulf countries and the U.S only time can tell us.

How Oil Prices Reacted to This Expected Increase in Demand?

The price of oil remained neutral amid the increase in demand. Although crude oil sale has increased massively.

But due to the CPI figures and recession talks the price of Oil remained stable.

Brent oil futures remained constant at around $85.78 a barrel. As of today, WTI crude oil is priced at $77.48 a slight decline in its price.

Market experts do believe that the second half of 2023 will be a different scenario for the oil market and oil prices.

The high demand will force the prices to go on up. The current economic indicators show that U.S. economic growth will be sluggish for the rest of 2023.

Experts do believe that those who are willing to earn big profits in the oil trade, should invest in both crude and Brent oil now when the price is relatively low.

Once the price has gone up the margins for earning will be diminished. The market is likely to remain slow throughout this week.

But next week when the trade will begin market will operate at such a high pace.