MNI Commodity Analysis: Chinese Travel Sustains Strength but Economy Shows Underlying Weakness

(MNI London) - MNI Commodity Analysis: Chinese Travel Sustains Strength but Economy Shows Underlying Weakness

Executive Summary:

• Chinese crude imports were weak in April as a solid start in Q1 for the country’s commodity consumption lost some of its momentum. It has caused fears around China’s ability to hold up global commodity demand in 2023 as other key consumers fail to pick up the slack. It has spurred some of the demand side fears that caused crudes overall price fall across the last month.
• Travel remains bullish as the economy reopens, especially with surging domestic and international flight activity for Golden Week Labour Day travel at the start of the month. It was the country’s first restriction-free Golden week after more than three years. International travel from China gaining into Q2 is crucial for jet fuel demand forecasts and overall global oil demand growth in 2023. Domestic flying has reached pre-pandemic levels while international lags heavily at only around 40% - but is growing quickly.
• Manufacturing activities slowed in April, with PMI figures showing the first contraction since December 2022, indicating that China’s rebound may not be a simple recovery story and creating a slowing backdrop for diesel demand in particular.
• Russia remained China’s top crude supplier in April as refiners took advantage of steep discounts on sanctioned barrels to help support China’s economic recovery. Demand for Russian barrels shows no signs of slowing. China has issued export quotas earlier than usual, allowing refiners more flexibility to plan – though quotas remain well below late 2022 levels.

MNI Commodity Analysis - Chinese Travel Sustains Strength but Economy Shows Underlying Weakness.pdf