Wall Street Turns Bearish As China’s Economic Recovery Stalls

By Aya Jootar  Published On June 19, 2023
  • Despite relaxed Covid-19 measures, China’s economic recovery has been less impressive than anticipated, with a weak industrial recovery and lower-than-expected demand for oil impacting global prices.
  • Beijing is considering a package of stimulus measures to boost the economy, with Wall Street responding with growing bearishness about the oil price outlook due to increased supply and recession fears.
  • The oil markets are experiencing significant volatility as they balance bullish and bearish factors, including higher U.S. crude production and the potential resumption of oil exports from Iran.Last December, Beijing announced the most sweeping changes to its strict Covid-19 guidelines, including relaxing testing requirements and travel restrictions. As the world’s largest importer of crude, most commodity experts were optimistic that the country’s economy would recover quickly and give a healthy boost to oil demand, with some even touting a swift return to $100 oil.

    Unfortunately, China’s recovery has been less than impressive, and the initial excitement in the oil markets has been tamped down by a harsher reality. China’s industrial recovery has not been up to par and has fared worse than consumer-facing sectors. The transport sector has also been unimpressive with trucking activity failing to pick up as expected. Jet fuel demand has been disappointing with international flights from China only at 39% of pre-pandemic levels.

    Immediately after the Covid rules were relaxed, Chinese refiners went on a crude oil buying spree betting on a quick return to downstream demand. But that has failed to materialize leading to onshore inventories climbing to a two-year high.

    The current economic outlook is not good, either. Bloomberg has reported that China’s credit demand weakened in May as the economy’s recovery lost steam. Aggregate financing fell to 1.6 trillion yuan ($224 billion) in May, considerably lower than the median estimate of 1.9 trillion yuan.

    Source: OilPrice


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