We reported recently that China has passed another milestone in its economic development and has become the number one consumer of liquid fuel. Now that China imports a lot of liquid oil and demand for oil has surged, West Texas Intermediate has reversed earlier losses.
Whereas WTI for November delivery rose as much as 50 cents to $102.52 on the New York Mercantile Exchange, Brent for November settlement was 17 cents lower at $111.11 a barrel on the London-based ICE Futures Europe exchange.
A month ago, China overtook America as the largest buyer of oil on the international markets which is good news for oil companies; however, quite a tough situation for China as it has increased its energy insecurity. The report from the Energy Information Administration of the U.S. government, says that China’s net oil imports hit an average 6.3 million barrels a day.
The last couple of decades have seen tremendous growth in Chinese economy and so have been the growth in demand of oil from the country. Whereas earlier in 1996, it accounted for just 5 per cent of the world’s demand, the demand for oil has now doubled up at 11 per cent. Moreover, as China does not have much internal sources to meet the demand, it will have to depend on Gulf oil.
Estimates are that Chinese consumer demand for oil will continue to grow rapidly for various obvious reasons; one of them is that people are buying more vehicles as household incomes are rising. The nouveau riche in the country is turning for oil guzzling luxury cars. It is to be noted that foreign policies are often influenced and dictated by energy requirements of a country.
West Texas Intermediate Gains
Amidst the news that China is going to import much more oil than earlier, West Texas Intermediate reversed earlier losses. This has happened despite the fact that the two parties in Congress in the U.S. are still not unanimous on debt ceiling and partial government shutdown which is not only impacting the national economy but the global economy.
In New York futures rebounded to as high as 0.5 per cent. This was contrary to what happened earlier wherein they were down as much as 0.8 percent. Nonetheless, net crude imports from China rose to 25.61 million metric tons last month. Traders believe that China remains a key driver of crude demand.
To contact the reporter of this story: Jonathan Millet at firstname.lastname@example.org