World Still Waiting to See What China Reopening Means

World Still Waiting to See What China Reopening Means
Macquarie Group, Goldman Sachs and FGE focus on China's reopening.

The world is still waiting to see what China reopening means.

That’s according to Vikas Dwivedi, a Global Oil & Gas Strategist at Macquarie Group, who told Rigzone that the range of demand increase scenarios from a Chinese reopening is 700,000 barrels per day at the low end and two million barrels per day at the high end.

“Consensus seems to be near 1.5 million barrels per day,” Dwivedi said. 

“We estimate the demand benefits will be approximately 800,000 barrels per day and disappoint against exuberantly bullish expectations. We estimate Chinese reopening will increase refined product supply by 1.5 million barrels per day, thus are estimating 700,000 barrels per day of increased exports,” he added. 

Looking at how much “revenge travel” will occur in China as the reopening continues, Dwivedi said Macquarie Group does not believe there will be significantly greater road demand “as Chinese road travel has been relatively open through the lockdown”. 

“The bulk of the increase in demand will be air travel, especially international travel. In fact, the increase in air travel makes up 400,000 barrels per day of our 800,000 barrel per day total demand increase,” Dwivedi added. 

In a report sent to Rigzone recently, analysts at Goldman Sachs said they see oil markets “unprepared for a sequential demand growth as China reopens”.

“With physical and financial oil market participants unduly concerned by a recession, aside from the broader structural underinvestment thesis, we see oil markets unprepared for a sequential demand growth as China reopens and international travel continues to recover,” the analysts stated in the report.

“We continue to forecast annual average 2023 Brent forecast of $97.50 per barrel, and $105 per barrel by 4Q23. In our view, only a combination of several bearish shocks would diminish our bullish view versus current cal23 Brent forwards of $83 per barrel that price China demand flat through 1Q23 and no disruption to Russian supply,” the analysts added in the report.

“With regards to China, almost all mobility restrictions had been lifted by early 2023, leaving the country’s demand poised for a rebound from very depressed levels. We currently estimate China’s oil demand to be c.14 million barrels per day, versus our Jan-22 expectations of 15.5 million barrels per day, and expect a normalization versus 2021 levels by May-23, increasing c.1.6 million barrels per day YoY by 4Q23,” the analysts continued.

James Davis, the Director of Short-Term Global Oil Service & Head of Upstream Oil at FGE, told Rigzone that FGE has China’s oil demand growth at 500,000 barrels per day this year but warned that a return to a Covid-zero policy would put all of this growth at risk.

“With much of the oil markets strength in recent weeks having been driven by China demand expectations, a return to a Covid-zero policy would put a lot of downwards pressure on oil prices,” Davis said.

Weekly Covid-19 cases in China jumped more than 67 percent from the week commencing December 19, 2022, to the week commencing December 26, 2022, according to data from the World Health Organization (WHO), which showed that weekly cases then jumped 2.13 percent to the week commencing January 2. Since then, weekly Covid cases in China have dropped for two consecutive weeks, WHO figures showed.  

Covid deaths in China increased for five consecutive weeks from the week commencing December 5, 2022, before dropping 23.07 percent from the week commencing January 9 to the week commencing January 16, according to WHO data.

To contact the author, email

What do you think? We’d love to hear from you, join the conversation on the Rigzone Energy Network.

The Rigzone Energy Network is a new social experience created for you and all energy professionals to Speak Up about our industry, share knowledge, connect with peers and industry insiders and engage in a professional community that will empower your career in energy.

Most Popular Articles