China is returning to daily life without restrictions, but the demand for oil is not increasing
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WTI crude oil has been trading near $80 for some time now and FXMAG team wonders, what could be the next factor driving the prices. Let's hear from Andrey Goilov, member of RoboForex Analytics Department.
The crude oil market is very dependent on demand forecasts in Asia, particularly China. Initially, it was thought that as soon as lockdowns and quarantine measures came to an end, and Chinese borders opened, the country's demand for fuel would increase. It will then smoothly return to the pre-pandemic levels. However, things are not happening as fast as they could. China is returning to daily life without restrictions, but the demand for oil is not increasing.
This is due to systemic problems in the real estate market, which is holding back the whole Chinese economy. Moreover, inflation in the country remains too high. Exports are facing difficulties. All this makes economic processes slow with a cautious approach.
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Demand for crude oil in China will give the commodities sector a strong boost. India is now highly active with the consumption and import of crude oil and oil products. There could be a new point for growth for this market in the country in the long run. The US needs to replenish strategic reserves, which are already depleted. If the US starts buying oil, the market will feel the demand, and the prices will rise as a result.
OPEC and OPEC+ mechanisms in terms of price regulation are exhausted.
US dollar weakness, which is based on the end of the Federal Reserve's tight monetary policy phase, would support crude oil prices.
