Oil market outlook: China demand recovery hopes support market

Oil market outlook: China demand recovery hopes support market

Oil prices were seen mixed on Tuesday morning with the economic data for China for 2022 causing bearishness, but the opening up of the borders and expectations of demand recovery are providing the counter bullishness.

Earlier, China's GDP data showed a growth of 3% for 2022, underperforming the official target of 5.5%. Crude oil refining throughput for 2022 was also lower y-o-y. However, considering these data points are for the period before the announcement on removal of the covid 19 restrictions was made, it is likely that demand numbers going forward would recover. It is this optimism that has supported the markets.

As mentioned in last week's report, the opening of the Chinese borders pushed up key benchmark spreads, pushing up the Dubai swaps time-spreads last week. The US inflation data showed the annual consumer price index falling to the lowest in more than a year amidst US Fed tightening. This has also raised market expectations that the Fed could be less hawkish which would support the oil markets.

With the narrowing of the Dubai Brent EFS spread, which is indicative of the arbitrage window to Asia and with the fall in freight rates, Asian refiners have found greater interest in cargoes linked