OPEC says country's consumption recovery building momentum as economy rebounds

The Organization of the Petroleum Exporting Countries has forecast that China's crude oil demand will surge next year, as the nation's economic activity recovers strongly following the COVID-19 outbreak.

Despite a contraction of 6.8 percent year-on-year in the first quarter of this year, China's GDP growth may recover faster than expected, as production resumed in the nation over the past three months, according to OPEC's monthly report published on Tuesday.

China's GDP is forecast to increase by 1.3 percent this year, followed by growth of 6.9 percent in 2021, it said.

With the country's policies remaining supportive for the rest of the year to help the economy continuously advance out of the COVID-19 pandemic, a consumption recovery is gradually building momentum, the organization said.

Tang Sisi, an analyst with research service BloombergNEF, agreed, saying oil demand in China has continued to recover as economic activity ramps up and road congestion levels are steadily increasing.

"Peak-hour road congestion levels are above the 2019 level in major Chinese cities such as Shanghai and Guangzhou, and domestic flights have also recovered to 80 percent of their normal schedules," she said.

The oil sector recovery, supported by the efforts of OPEC and non-OPEC oil-producing nations to rebalance the market, has been an important contributor to further buoying global economic development.

BloombergNEF expects oil demand in China to remain healthy in the second half of the year.

"The recovery in fuel demand will boost run rates at Chinese refineries, maintaining China's appetite for crude oil," Tang said.

According to the General Administration of Customs, China's crude imports surged in May to 47.97 million metric tons, or 11.34 million barrels per day, a 15 percent jump from April and 160,000 barrels per day more than the previous record set in November, a reflection of a recovery in the energy sector with demand getting back on track in the world's second-largest economy.

China, the world's top importer of crude oil, imported 53.18 million tons of oil in June, up 34 percent year-on-year and a 10.86 percent jump from May.

The spot market was also supported in June by a gradual recovery in crude demand and rising throughput at major refinery hubs, as lockdowns and travel restrictions eased in many countries and cities.

Li Li, research director at energy consulting company ICIS China, said that after China experienced the major impact of COVID-19 in the first quarter of this year and has since managed to successfully control the further spread of the virus, it is leading the way in the global economic recovery, with continued policy support.

However, she said it's important to sustain the trend as the continuing surge in infections worldwide could erode rebounding consumer confidence and spending.