The Brent crude oil price was down 0.68% for the four weeks to 13th June, representing a 37% year-on-year (y-o-y) decrease, settling at $74.21/barrel. Much of this recent downward price movement can be attributed to fears of more interest rate hikes in the US. However, a slight improvement in the Chinese economy and rising oil imports have resulted in greater demand optimism within the oil market.
The Chinese Caixin manufacturing PMI returned to growth territory at 50.9 in May from 49.5 in April. The reading was higher than market participants’ expectations, which were unchanged at 49.5. Additionally, inflation rose slightly to 0.2% y-o-y in May, up from 0.1% in April. However, market sources had factored in a y-o-y increase of 0.3%. The low inflation rate in China has been a key concern among policymakers in the country following the lukewarm economic reaction after the relaxing of COVID-19 restrictions in December.
According to preliminary data from the General Administration of Customs of China and Mintec calculations, the country imported 12.16m barrels per day (bpd), up from 10.36 million bpd in April, constituting a 17.4% month-on-month rise in oil imports. The increase in imports has been cited as early evidence that oil demand in China is growing again following strict COVID-19 restrictions.
Market players have stated that they expect climbing oil demand in China to function as a bullish driver in the market, with the caveat of continued economic growth. While market sources noted that recent economic data constituted a slight improvement within the Chinese economy, they commented that more data is required to understand the extent to which China is successfully emerging from strict COVID-19 restrictions.