Oil: Chinese demand peak shifts market balance – Commerzbank

Commerzbank’s Carsten Fritsch notes that softer-than-expected US sanctions on Iran have added to downward pressure on Oil prices despite severe disruptions to tanker traffic through the Strait of Hormuz. At the same time, China’s largest refiner believes national Oil demand peaked last year and that crude processing may also have reached its peak, pointing to lower import requirements. If Middle East supplies normalize, weaker Chinese demand could contribute to an oversupplied market and further downside in Oil prices.

Sanctions and China demand concerns

"Accordingly, oil prices are continuing to fall today, having already dropped by more than 2% yesterday. This comes despite data from Kpler showing that only two tankers passed through the Strait of Hormuz yesterday – the lowest number since early May."

"The company’s CEO does expect a slight recovery in demand next year, provided the conflict between the US and Iran eases. However, in his view, there is unlikely to be a return to last year’s levels."

"The company therefore assumes that oil demand in China peaked last year. So far, this was supposed to happen next year."

"Lower crude oil demand from refineries would also mean lower import requirements for China. This would ease pressure on the market and, should oil supplies from the Middle East return to normal, contribute to an oversupply and consequently to lower oil prices."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)