Economic Boom Expected from China's Reopening
Daily Demand to Drive 1 Million Barrels
Could Increase to 1.4 Million Barrels if Construction Market Booms
As China's economy, which had been subdued by the zero-COVID policy, stretches with the reopening of economic activities, it is expected that China will drive 40% of the world's oil demand this year.
On the 23rd (local time), global energy consulting firm Wood Mackenzie forecasted in a report on the impact of China's economic reopening on global energy that "out of the expected global daily crude oil demand of 2.6 million barrels this year, China will drive 1 million barrels." This accounts for 38.5% of the world's daily demand.
The surge in China's oil demand is analyzed to be due to the lifting of strict lockdown measures, which increased previously suppressed consumption and mobility.
According to the National Bureau of Statistics of China, the industrial production growth rate for January and February, when economic activities resumed, recorded 2.4% year-on-year, showing a rebound for the first time since September last year. Fixed asset investment also increased by 5.5% compared to the previous month, and real estate development investment trends rebounded. The real estate development investment growth rate, which was -10% in December last year, recorded -5.7%, reducing the decline.
Considering these trends, Wood Mackenzie projected that China could achieve economic growth in the 7% range this year. Additionally, as the Chinese government is expected to launch a large-scale economic stimulus this year, the construction market growth rate is also predicted to rise by more than 10%. Due to the resulting construction boom, China's oil demand is estimated to increase up to 1.4 million barrels.
Wood Mackenzie explained, "We expect China to achieve economic growth rates of 7% in 2023 and 5.5% in 2024," adding, "Since the global economy is expected to slow down due to the impact of interest rate hikes, China will account for a significant portion of oil demand."
Oil prices this year are predicted to trade at an average of $89.40 per barrel based on Brent crude. Previously, global investment banks including Goldman Sachs had expected oil prices to exceed $100 per barrel this year, but as of the 23rd, Brent crude is trading at $75.91 per barrel.
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