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WoodMac: Oil Prices Could Surprise To The Upside With China’s Reopening

China’s economic growth could exceed official targets and consumer mobility and spending could surge after the reopening to super-charge a renewed increase in energy commodity prices, especially crude oil, Wood Mackenzie said in a new report on Thursday.

“Our scenario is bullish for all commodities. Finely balanced markets for oil, LNG, and coal are leveraged to a super-charged Chinese bounce,” WoodMac’s analysts wrote.

Crude oil will be a big winner of the Chinese reopening, with prices set to increase, they noted.

China has a history of over-delivering on its economic growth targets, with GDP growth outpacing government forecasts in 12 of the past 18 years, according to WoodMac. The consultancy ran two scenarios for China’s reopening – a base-case scenario with 5.5% growth and a high-growth scenario with growth at 7% this year. The high-grow scenario is far from certain, but given China’s history of under-promising and over-delivering, it cannot be easily discounted, the consultancy said.


“Depending on its consumers’ appetite to spend and the ambition of government policy, China’s reopening could once again turn up the heat on prices across the energy and natural resources spectrum,” it added.

Under WoodMac’s base-case scenario, Chinese oil demand would rise by 1 million barrels per day (bpd) this year, driving the expected 2.6-million-bpd growth in global oil consumption. Barring a significant recession, WoodMac sees Brent Crude rising from current levels to average $89.40 a barrel for 2023.

In a high-growth scenario, the world’s top crude oil importer could see oil demand jumping by 1.4 million bpd on the year, or about 400,000 bpd higher than in the base case, driving up oil prices by another $3-$5 per barrel compared to the base case.

“As the Chinese economy reopens, commodity prices will not return to the extreme highs of 2022,” WoodMac’s analysts said.

“But energy and natural resource markets remain finely balanced and commodity prices could yet surprise to the upside this year.”

By Tsvetana Paraskova for

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