China’s recovery will take months if not years.

The upbeat sentiment that swept across global markets last week following news of China opening up and relaxing some of the punitive coronavirus measures that were in place previously has given way to pessimism again. It’s the same Beijing syndrome that the oil markets have developed over the past two years – picking up good news before they are smashed by another wave of COVID cases, this time around Beijing being the epicenter of new cases. In addition to lower demand forecasts by the IEA and OPEC, demand concerns are making headlines again, pushing ICE Brent to $92 per barrel. 

Despite a weeklong holiday that usually supports domestic consumption in October, last month’s China data have provided a grim outlook for Q4 demand amidst surging Covid cases in the country. Positive cases (some 16,000 per day already) are on par with levels seen in late April when Shanghai went into full lockdown, prompting market watchers to cut China’s GDP growth even further to 3.0-3.5%. Chinese oil buying is still yet to increase above levels seen in the spring months of 2022 – even in October exports to China were still only 9.4 million b/d according to Kpler data, 6% lower year-on-year. China’s economy is still rattling from the impacts of the lockdown, with October factory output growing slower than expected (up 5% year-on-year) and retail sales dropping for the first time since May 2022.