WTI and Brent are ~$0.70 worse off apiece, edging away from their respective session lows made after China reported fresh COVID case counts that have remained around two-month highs (826 for Wed vs. 935 for Tue), raising lockdown fears from some quarters.
- Looking into the details, although COVID hotspots are centred away from major cities, Shenzhen has enacted lockdowns in some neighbourhoods, while Shanghai continues to find cases outside of quarantine.
- Contributing to wider growth worry, the Asian Development Bank (ADB) cut ‘22 growth forecasts for “Developing Asia” (includes China and India) from 5.2% to 4.6%, citing Fed tightening, issues stemming from China’s pandemic control measures, and fallout from the ongoing war in Ukraine.
- To recap Wednesday’s price action, WTI and Brent rose from session lows after the release of EIA inventory data on Wed, with crude and distillate stockpiles posting surprise declines, while there was a build in Cushing hub stocks. Both benchmarks failed to make headway above neutral levels however, with debate re: demand destruction doing the rounds after a much larger-than-expected build in gasoline stocks was observed (also larger than Tuesday’s reports of API estimates), raising worry re: demand destruction despite a decline in pump prices.
- Elsewhere, the International Energy Agency (IEA) released their monthly Electricity Market Report on Wednesday, sharply lowering their forecast for electricity demand growth in ‘22 on “slower economic growth” and “higher energy prices”.