Oil's Roundtrip Back to $100: Why China Could Determine What Happens Next
The U.S. crude oil price on Thursday topped $102 per barrel for its highest close since May.
TL;DR
- U.S. crude oil prices have surged to over $102 per barrel, the highest since May.
- Escalated fighting in the Middle East and the shutdown of Saudi Arabia's East-West pipeline have contributed to the rally.
- The market has priced in Middle East conflict but may not have fully accounted for increased Chinese demand.
- Chinese refiners are incentivized to buy crude due to high profit margins for diesel production.
- China previously acted as a swing consumer, slashing imports, but is now expected to increase them, though not to pre-war levels.
- Global inventories have been depleted by emergency stockpile releases, reducing a buffer against price increases.
- The effectiveness of verbal interventions to talk down the market appears to be waning.