At OilPrice.com Tsvetana Paraskova takes note of what appears to me to be an important development:
China’s refiners are expected to lower their refinery runs at the biggest scale—by 900,000 barrels per day (bpd)—since the beginning of the pandemic in 2020, as new COVID-related lockdowns weigh on fuel consumption, analysts and industry sources told Reuters on Thursday.
China’s demand, especially gasoline demand, has suffered in recent weeks as authorities continue with their “zero COVID†policy and lockdown large cities and areas to contain a surge in infections. Most recently, China locked down 26 million residents in the financial hub Shanghai, which hit demand as people are confined to their homes.
The return of severe lockdowns as China is battling its worst coronavirus outbreak in two years has prompted analysts to lower expectations of oil demand in the world’s top oil importer and, by extension, global oil demand for this quarter and the full year 2022.
Refiners in China are now set to reduce runs this month by nearly 1 million bpd, which would be equivalent to 6.3 percent of the average Chinese refinery production in recent months, according to Reuters calculations.
If it persists this development potentially has more serious implications both for Russia and the price of gas at the pump than any actions the U. S. has taken to date. Not to mention supply chains, many of which continue to run through China.
Its very simple. The world price will decline and gasoline here will decline; and Russian revenue will decline.
But being a reaction to a covid wave, it shouldn’t be long until demand picks back up. This is a window of opportunity, with respect to energy costs, for the Biden Administration. I doubt they will take it.
At the local grocery store the other day I was shocked to see the price of milk. I guess as part of his broader plan Putin has been sending his spies in to kill cows in CA and WI.
On the other hand, the US and the EU are still buying Russian oil, gas, coal, diesel…
Russia’s state budget is break even at $40/bbl, and today’s price is $106/bbl. So you need a 60% price drop just to get to the edge of punishing Russia.
Of all the major countries in the world, Russia is best situated to ride out any storm. That doesn’t mean they won’t suffer, but the EU, and possibly the US (doubt it), will collapse first.
The bigger problem is that the US/NATO/EU seems determined to start a general European war, which would immediately spread to North America. China might be able to sit it out.