Macroscope | How China and the US could drive up the price of oil

Name: China administers nearly 2 billion Covid-19 vaccine doses as Delta variant appears under control
Uploaded: 2021-08-31T06:30:16.000Z
Duration: 1 min 45 s
Description: China administers nearly 2 billion Covid-19 vaccine doses as Delta variant appears under control

Economic activity looks set to surge again as Beijing keeps a handle on Covid-19, while cases appear to be peaking in the US and should decline into the end of the year

Looking further afield, neither oil markets nor Beijing will ignore evidence of rising demand for oil in other key Asian economies

Reading Time:3 minutes

Why you can trust SCMP

Tugboats push a large crude oil tanker to a shipyard on the Yangtze River in Qidong, Jiangsu province. In 2020, China, the world’s biggest oil importer, took advantage of a plunge in global prices to build up its stockpiles. Photo: AP

Neal Kimberley

Published: 2:30pm, 31 Aug 2021

Expectations of a hurricane disrupting energy production in the Gulf of Mexico supported the oil price last week. But it is the gulf between demand and supply that will generate more lasting support for the crude price, with every chance that the pace of economic activity in China and the United States will again accelerate.

China is the world’s biggest oil importer so it makes sense for the country to always retain substantial inventories of crude. Indeed, when the Covid-19 pandemic first hit the global economy last year, triggering a collapse in the price of oil, Beijing presciently purchased large volumes as the price per barrel fell to 20-year lows.

But that was then and this is now. With the price having rebounded as global economic activity picked up after the first phase of the pandemic, China’s oil imports fell year on year in June and July, with Chinese refiners drawing on part of the stockpile built up in 2020.

That makes perfect sense, but only so far as China’s refiners, or indeed the authorities in Beijing, will want to see that stockpile depleted.

Of course there is an argument that, if Beijing perceives the need for a wider lockdown to limit the spread of the Delta variant, then that would have a materially negative effect on economic activity in China and, due to China’s central position in global supply chains, on the world economy.

01:45

China administers nearly 2 billion Covid-19 vaccine doses as Delta variant appears under control

But the oil markets may reasonably conclude that, just as Beijing was successful in stemming the tide of the coronavirus last year, it will be able to repeat that success this year.

.css-1m2rp1p{color:#34b8b5;}Macroscope | How China and the US could drive up the price of oil

Macroscope | How China and the US could drive up the price of oil