Covid-zero policies and pollution curbs stunt China’s oil demand

Covid-zero policies and pollution curbs stunt China’s oil demand

China, the world’s biggest buyer of crude, is set to start 2022 with a subdued appetite for oil. For that, you can blame — or thank — Beijing’s increasingly tough line on the virus, pollution, and rule-breakers.

The winter months are usually the time when refiners buy crude to replenish inventories, particularly ahead of holiday trips over the Lunar New Year period. But uncertainty over the severity of the new omicron variant, and China’s unwillingness to live with the virus, continue to impede travel plans.

The picture heading into the new year is one of stuttering demand growth, which is showing up in a plunge in the market for domestic fuels and cuts to refinery operating rates and margins. The drag on prices will be a comfort to the inflation hawks at the central bank, and could even derail plans by OPEC+ to raise production when the alliance meets again early next month.