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A rebound in Chinese demand won’t shoot oil prices higher, Citi’s commodities chief told Bloomberg TV.
“The only way to get oil back to 110 [dollars] or 120 is to have a bunch of supply disruptions from place like Libya, Nigeria and maybe even Iran and Iraq.”
While China’s demand for oil has picked up since the summer, it’s falling in other top markets, he added.
A resurgence in Chinese demand won’t be enough for a steep increase in oil prices, according to Citigroup’s global head of commodities research.
China’s zero-COVID policies have kept a lid on oil prices, though signs of them easing have raised hopes for a rebound in economic activity. But instead of demand, oil prices will follow supply signals, Ed Morse said.
“The only way to get oil back to 110 [dollars] or 120 is to have a bunch of supply disruptions from place like Libya, Nigeria and maybe even Iran and Iraq,” he told Bloomberg TV.
On Wednesday, Brent crude prices were up 1.4% at $96.01 per barrel, and West Texas Intermediate rose 1.7% to $89.90.
To be sure, an uptick in China’s oil appetite will impact the market, while OPEC+ is trying a establish a floor on prices with its production-quota cuts, Morse said.
“But we’re in a world where demand is sloshing downward across the world, whether you look at the US or Europe,” he added.
By contrast, China’s oil imports are up by 2 million barrels a day since the middle of the summer. But since the OPEC+ meeting, where members slashed quotas by 2 million barrels a day, oil prices have been “in a sideways little dance — it’s not going anywhere,” Morse said.
“I think there’s ample supply in the market for us not to have a big impact from China coming back,” he said.