Page 11 - AsianOil Week 29 2022

AsianOil EAST ASIA AsianOil

New COVID concerns

may once again

reduce Chinese oil

demand

POLICY CHINA’S most recent coronavirus (COVID-19)
outbreaks once again look like they could have
a significant detrimental effect on the country’s
crude orders in the coming weeks and months.
With oil prices dropping $1 as soon as Asian
markets opened on July 18, and COVID-19 cases
on the increase across China, the likelihood of
subsequent large-scale lockdowns by the gov-
ernment took centre stage.
In real terms this saw Brent crude futures dip
just below $100 per barrel. As a result, September
settlement date prices briefly hit $99.69 a bar-
rel. US West Texas Intermediate (WTI) crude,
meanwhile, dropped to $96.05.
Initial suggestions that China, the world’s big-
gest oil importer, may cut back on imports could
not prevent a rally in the markets by midweek,
though. Prices were back up in the $106 range
by late on July 19. The number of confirmed
COVID-19 cases in China is starting to rise,
however, and with it concern over the direction
crude orders from Russia will head. spokesperson, Shu Jueting, however, only
Real transmission figures have long been sus- went so far as to say the US had “introduced its
pected as being much higher than those revealed thoughts” on a possible price cap “from a certain
by Chinese authorities. Mass testing of tens of country”.
millions and the possibility of Shanghai once “On the Chinese side, we think the issue is
again facing mass lockdowns is already a reality. very complicated. The precondition of address-
Speaking in reaction to the drop in crude ing the issue is that all related parties should
Recent trade futures earlier in the week, Switzerland-based strive to facilitate dialogues for peace, to pro-
talks between the SPI Asset Management’s Stephen Innes said mote cooling down rather than heating up the
US and China saw oil was “opening the week softer as the market Ukraine crisis,” Shu added, also saying that this
digests the demand impact of the rise in new was “in line with the interests of all sides”.
no direct mention COVID-19 cases in China”. And despite US President Joe Biden contin-
As an issue coming just days after China uing to point the finger at Russian aggression in
made of a cap on refused US requests to cap prices on Russian Ukraine and knock-on effects on oil prices for
crude, to what degree the latest COVID-19 fig-
rising inflation, Shu would only add that “cur-
oil prices. ures may affect orders of Russian crude remains rently, global oil prices remain elevated, becom-
to be seen. ing one of the major factors in the high inflation
Recent trade talks between the US and globally and raising great concerns in the inter-
China saw no direct mention made of a cap on national community”.
oil prices. Any moves in this direction by Bei- US inflation hit 9.1% in June, its highest
jing would be seen as supporting Western-led level in 40 years. A month prior, China set its
sanctions against Moscow. At present, though, own record of 8.42mn tonnes of Russian crude
China, along with India, is one of the biggest imported, making any public condemnation of
buyers of Russian crude. Russia very unlikely indeed.
Speaking to the Wall Street Journal, US Treas- Yet with Russia now heavily reliant on Beijing
ury Secretary Janet Yellen indicated that she had for foreign currency at a time export options are
raised the price cap question with Chinese Vice narrowing, the latest COVID-19 numbers across
Premier Liu He when they held a virtual meet- China could be worrying exporters in Russia just
ing last week. A Chinese Ministry of Commerce as much as the Chinese government.™

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