While remaining on the higher band, international crude oil prices have seen some slippage in recent weeks as demand from China slumps amid rising COVID cases. Asthe global cases for COVID see a downward trend overall, cases in China have been rising and the economy is buckling under a lockdown under its ‘zero-Covid’ policy– resulting in demand destruction. 46 cities in China are under lockdown. Being one of the largest oil consumers in the world, the dent in demand has pushed crude oil prices a bit down amid otherwise price bullish sentiments.
Recently, international crude oil prices plummeted over demand concerns from China as well as the anticipation of global recession and rise in inventory. In its latest demand outlook, the IEA has kept its global oil demand forecast unchanged for this year, but also warned that lengthy pandemic lockdowns in China and growing international restrictions on Russia could weigh on global demand in the short term. On the other hand, OPEC has cut its demand forecast for 2022 in its latest demand outlook due to Ukraine’s invasion as well as surging Covid cases in China. P Morgan too has lowered its global demand forecast for 2022 by one million barrels per day (bpd) on account of higher oil prices, weakening growth outlook and intensifying geopolitical confrontations.
Though the oil prices have been showing their capricious nature in recent weeks, the backdrop however continues to remain bullish for crude oil. Despite strong volatility, prices remain on the higher side. Since prices of crude oil are already high, they will skyrocket in case China lifts Covid-19 lockdown restrictions and Europe finally boycotts Russian oil imports. China has already beckoned the ending of the strict lockdown as soon as this month only. This would certainly give a push to the demand coming from mobility and transportation. And then, there are now increased chances that the EU will ban Russian oil too this month, which will increase demand and hence prices.
Oil prices may have fallen recently as highlighted above, but that does not bring home any good news. Fixed prices of petroleum products and the subsidy is wreaking havoc in Pakistan. With a bullish outlook for prices, and a deadlock over petroleum subsidy and price only jeopardizes the country’s fall further into the abyss.