The Commodities Feed: China omicron concerns

The Commodities Feed: China omicron concerns

Brent finished last week up about 5% WoW on the back of mounting supply concerns. However, we have started this week on a weaker footing. Both Brent and WTI are trading lower in the early morning session in Asia. Covid developments in China are not helping sentiment. Tianjin has begun city-wide testing after two local Omicron cases were detected. While we see other countries adapting to live with Covid, China clearly continues to pursue its zero-covid policy. This is a risk to oil demand since China is the largest crude oil importer in the world. We are also approaching Chinese New Year, a time when there is normally plenty of domestic travel, and so any domestic restrictions will weigh on oil consumption. However, for now, the market is still mostly focusing on supply dynamics. Even with supply, however, we are starting to see an improvement. In Libya, output has reportedly returned to 900Mbbls/d after maintenance work on pipelines. The maintenance work had led to a fall in production of 200Mbbls/d. While in Kazakhstan, clearly there is still plenty of uncertainty and so it will remain a risk to supply. That said, the Tengiz oil field, which initially adjusted production due