China’s diminished appetite for imported oil and gas: is the price not right?
Following the Russian invasion of Ukraine, global energy markets have tightened with prices of oil and gas surging. At the same time, Chinese oil and gas demand has been relatively weak, raising questions about the impact of high prices on China’s appetite for imported oil and gas. This comment argues that China’s weakening economy, due to Beijing’s dynamic zero-COVID policy, is weighing on demand for oil gas imports more than high costs. This matters because if prices are the main culprit, China’s oil and gas imports may well remain muted through year-end, as markets seem set to remain tight. But if the macroeconomic outlook is the main driver for oil and gas buying, a recovery in economic activity later this year, on the back of a strong government stimulus, will support renewed buying activity. But it is by no means a foregone conclusion that the government’s 5.5 per cent GDP growth target will be met. Despite the need for stability in this year of political transition, limiting the spread of the pandemic will remain the top priority. The government will seek to reinvigorate growth to the extent possible, but the focus will be on employment and if logistics allow, on infrastructure development.