Oil prices are heading to record new high levels and breach the level of $100 per barrel, while the American newspaper “The Wall Street Journal” raised the question whether China has the ability to curb this rise, which has become harmful to its economy, which depends on crude imports from abroad.
The American newspaper report, seen by Al Arabiya.net, says: “Since the beginning of the year, Beijing has benefited from cheap Russian supplies, but drivers have begun to feel the pressure again at gas stations as the price of oil approaches $100 per barrel.”
The Wall Street Journal reported that the decline in supplies may push global oil prices to rise further and may exceed the level of $100 per barrel soon.
The report stated, “China is currently the largest importer of crude oil in the world, and while China’s growth appears to have rebounded modestly in August, there are still two main reasons why markets are overestimating the potential scope of Chinese demand and its impact on global standards, including Brent crude.” “At the end of 2023.”
The report adds: “First, in recent months, China has aggressively targeted Russian oil, which is available at discounted prices. Second, China’s crude oil imports still appear well ahead of underlying demand – and exports of refined products, especially diesel, are rising sharply.”
Since the beginning of the war in Ukraine, China has made clear that it considers Western sanctions against Russia illegal, and it continues to import large quantities of Russian oil. But since December 2022, when the United States and Europe agreed to cap Russian oil prices using their control of the global shipping insurance business, Chinese purchases have risen dramatically.
CIC data showed that China’s total imports of crude oil recorded the second highest volumes ever last August, but excluding imports from Russia, they rose by only about 2% from December 2022 levels. Imports from Russia rose by about 60% during the same period. .
According to CEIC data, China imports Russian oil at a discount of $28 per metric ton on the average price of total crude oil imports, which is much lower than the discount of $61 in May, but still significant. As long as this gap persists, it will continue to act as a shock absorber for Brent and other global standards.
The Wall Street Journal cites its expectation that Chinese activity will contribute to curbing prices by saying, “There is no guarantee that Chinese imports will continue to grow rapidly, as it appears that China has been working vigorously for most of 2023 to replenish its oil reserves, taking advantage of the decline in prices.”
China does not regularly publish data on its crude oil reserves like the United States, but in the second quarter of this year it produced and imported about 14 million metric tons of crude oil more than it refined, according to estimates by the specialized company (CEIC). Production of refined products such as diesel has also been suspiciously accelerated in 2023 compared to traditional demand drivers such as the real estate sector and heavy industry.
But the report concluded by saying, “Of course, Chinese growth could always surprise to the upside in late 2023, although stability rather than a strong recovery seems more likely at the moment. China may have other reasons to continue filling its reserves.” Oil prices, even at higher prices, given Beijing’s increasing focus on security, assertiveness and tense relations with the West.”