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| Chinese Economy Growth - Q2 |
The fall of crude oil prices, which rattled the markets last week, did not continue on Monday. As of 11:00 GMT, WTI and Brent were trading at $102.15 and $105.62 respectively. The price of LNG, liquified natural gas, meanwhile, is significantly up, crossing the $7.50 mark, clearly reflecting the widespread concerns in Europe about Russian supply of the commodity.
With LNG at current level, all major European economies are going to suffer and in this context, the specter of recession is still looming large over the Eurozone; the state of the German economy - the biggest in Europe and the fourth largest in the world - is of particular concern at present, as the political leadership contemplates about rationing gas in order to deal with growing demand.
The fear of recession may have definitely played a role in the significant US inventory build during the last two weeks.
There were concerns over the state of the Chinese economy, the world's second largest economy, too that stems from China's rigid zero-Covid-19 policy: the policy dictates the impromptu lockdowns in major cities at short notice in order to curb the spread of the disease that result in static economic activities.
The Chinese economy, however, grew in the Q2 2022, thanks to the introduction of stimulus packages: the key Chinese economic indicators plunged in April, sending shockwaves across the global economy; the Manufacturing PMI, for instance, hit 47.4 - a very low indicator, indeed.
The economy has since recovered and analysts hope Chinese crude oil demand will recover in the coming months. Since China keeps buying Russian oil, along with India, at record discounted prices, its impact on the global crude oil price remains to be seen, though.
The trip of President Biden to Saudi Arabia last week, however, has not boosted crude oil supply in the markets. Although it was hyped up as a game-changer by some, Saudi Arabia and the UAE had been raising the issue of limited spare capacity even before the important visit.
Although Saudi Arabia is under growing international pressure, including that of the US, to boost the production, it is highly unlikely that there will be a substantial boost in the coming months.
Even major oil producers, however, have realized that crude oil prices at these levels harm them too in the long run; they have already come back on them like a boomerang: the UAE and Saudi Arabia, for instance, have been compelled to allocate $billions for low-income families in the respective countries as the cost of imports has multiplied; it can only get worse.
All in all, the probability of oil price plunging far below $100 in the current circumstances is very low, unless the West comes up with a cohesive policy on Russian oil and gas; the status-quo is not in anyone's interest at present, especially when the northern hemisphere approaches the colder period in two months' time.
