New daily coronavirus cases in China have doubled, officials said on Sunday, with the epicenter of a new outbreak located in the province surrounding Beijing, triggering fresh restrictions on movement in the capital. China has been the center of global oil demand pull in recent months, with the country’s economy and fuel consumption recovering at a faster and steeper rate than previously expected. Crude imports by China’s independent refineries jumped 42.2% on the year to a record high of 188.11 million metric tons in 2020, latest data collected by S&P Global Platts showed. That growth, however, was predicated on the government’s successful efforts at controlling the viral spread. The latest reports suggesting fresh outbreaks in Beijing and surrounding regions undermine the country’s demand prospects for oil in the short term.
Further stoking demand concerns, White House coronavirus task force warned Sunday the recent spike in new COVID-19 cases domestically could be driven by a possible new “USA variant.”
As of Jan. 10, more than 22 million cases have been confirmed in the United States, according to data from John Hopkins University. The U.S. counted more than 200,000 cases a day for most of December and January as the virus surged across the country, lifting death count to more than 350,000.
Analysts caution oil prices could see a correction in coming weeks should fuel demand across global economies remain depressed due to the pandemic and efforts to combat its spread.
In its most recent research, Goldman Sachs revised down its demand forecasts for January, February and March by 1 to 2 million barrels per day (bpd) for each month. Still, and largely as a result of the Saudi Arabia surprise cut of 1 million bpd announced last week, the bank sees a small deficit in February, a revision from an implied build of 600,000 bpd previously. The Wall Street investment house expects the oil market to be in deficit for the remainder of the year, peaking at 2.3 million bpd in September, or nearly 3% of global oil supplies for that month.
Looking ahead, the market awaits the Energy Information Administration’s Short-term Energy Outlook due on Tuesday, and Organization of the Petroleum Exporting Countries’ Monthly Oil Market Report due out Thursday.
Monday morning’s losses in the oil complex follow a solid rally that pushed both crude benchmarks to near 11-month highs on Friday. Saudi Arabia, the world’s biggest oil exporter, surprised the market on Jan. 5 with a voluntary output cut of 1 million bpd for February and March. The move came as OPEC and Russia-led partners agreed most producers would hold output steady in February and March, while allowing Russia and Kazakhstan to modestly raise output by 75,000 bpd.
Liubov Georges can be reached at email@example.com