It was strong demand for gasoline in China that drove the country’s crude oil demand higher, Bloomberg has reported, citing estimates from CNPC and Sinopec along with analysts.
Gasoline demand in May, the data showed, was 5 percent higher than it was in the last pre-pandemic year. Diesel consumption, on the other hand, remained largely flat, Bloomberg said.
The data adds to already strong evidence that China is among the biggest swing factors in oil prices. News about lower demand in China, even if it is the result of seasonal refinery maintenance, tends to send oil prices lower. News about improving demand invariably pushes them higher.
Crude oil import data from the world’s top importer has been particularly bullish for prices. China has been buying oil like there’s no tomorrow for months, especially during the worst of the pandemic when prices tanked to multi-year lows. As a result, prices rose, and they are still rising, prompting doubts that the buying spree will continue.
The immediate outlook is not particularly bullish because of the refinery maintenance season. As Reuters’ columnist Clyde Russell reported last month, some 1.2 million bpd in refining capacity went offline for regular maintenance in May and will remain offline until the end of this month. This would mean lower crude oil imports during the period.
Indeed, import data for May showed a 15-percent drop from a year earlier. This was expected and did not have a lasting effect on prices. Still, rebounding demand elsewhere may dampen China’s thirst for crude as it pushes Brent above $73 per barrel and West Texas Intermediate above $71 per barrel.
Rising crude prices are part of a broader commodity price surge caused by supply chain disruptions resulting from the pandemic and threatening China’s stellar recovery. The country has tried to rein prices of commodities in, but there is little it can do that doesn’t come with a hefty social cost.