BEIJING (BLOOMBERG) – Traffic on China’s typically busy city streets has shown signs of recovery as the key crude-importing nation managed to quash a resurgence in Covid-19 cases, bolstering the outlook for energy demand.
Congestion in Beijing, the capital, had risen 11.8 per cent as at mid-morning on Tuesday (Aug 24) compared with a week earlier, according to real-time traffic data from Baidu.
The volume in the commercial centre of Shanghai was 2.8 per cent higher, while it was up 6.8 per cent in Zhengzhou and 3.4 per cent in Nanjing, both regional cities.
Oil markets have been rocked over the past month as the spread of the Delta coronavirus variant spurred fresh curbs on mobility in countries around the world, including China.
While that helped to drag the global benchmark Brent sharply lower, evidence that activity is returning may spur a recovery.
The signals from China come about a week before the Organisation of Petroleum Exporting Countries and its allies meet to decide on output policy.
“China’s oil demand destruction due to lockdowns is likely smaller than many think,” Royal Bank of Canada analysts including Ms Helima Croft said in a report.
Thanks to mass testing and strict quarantine policies, China contained the resurgence in a little over a month after the outbreak hit nearly 50 cities across 17 provinces.
At one point, more than 200 neighbourhoods across the country were labelled high- or medium-risk, triggering sweeping curbs that included cutting off train services and some domestic flights.
As near-term consumption took a hit, the nation’s top refiner, China Petroleum & Chemical, had to cut planned operations by 5 per cent to 10 per cent at some plants this month.
A similar snapshot from industry researcher SCI99 showed that operating rates at most state refineries declined in the two weeks to Aug 13.
While the daily case count is now back to zero, oil traders will be on the lookout to see that there is no fresh uptick in China that could jeopardise the nation’s progress.
Outbreaks of the highly infectious Delta strain continue to roil other countries in the Asia-Pacific, including Australia and Vietnam.
In addition, not all activities in China have yet bounced back, however.
Travel by air remains sluggish, with departures from China’s 20 biggest airports at just 40 per cent of 2019 levels in the week until Monday, according to Ms Sisi Tang, an analyst at BloombergNEF.
That compares with about 70 per cent in mid-July.
Goldman Sachs Group, which is bullish on oil, has argued that the virus wave will not derail the rally in the commodity.
“Delta is a transient event to oil demand,” analysts including Mr Damien Courvalin wrote in an Aug 23 note.
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