A Chinese stimulus package announced by the government of Xi Jinping highlights the administration’s concern surrounding recent slow growth and weak demand, according to analysts from TPH & Co. and Rystad Energy.
In China’s biggest stimulus package since the COVID-19 pandemic, the government is attempting to reverse the country’s recent deflationary trend and turn back toward a 5% GDP growth target, TPH & Co. analysts said on Sept. 24.
China’s central bank announced several reduced interest rates, including a 50 basis points cut to its reserve requirement ratio and a 20 basis points cut to seven-day reverse repo rate—the interest rate at which the central bank borrows money from commercial banks. The stimulus package also reduces the minimum down payment requirement for housing purchases, among other measures.
Oil demand for the past three months has been weak, especially in China, Rystad Global Market Analysis Director Claudio Galimberti said Sept. 24 in a research report. The package should provide some respite for oil prices, he said.
Brent oil prices surpassed $75/bbl on Sept. 24, supported by the promising economic news from China, the Fed’s rate cut last week as well and escalating geopolitical tensions in Gaza.
But on Sept. 25, oil prices fell more than 1% as investors reassessed whether China's latest stimulus plans would be enough to boost its economy and spur fuel demand in the world's largest crude importer, Reuters reported.
“The stimulus has had an immediate impact on oil prices, but the long-term impact on oil demand could be key,” Galimberti said. “The package could reignite fuel demand in the world’s largest oil importer, especially after a steep drop in refined oil imports this year driven by its manufacturing sector struggles.”
Oil prices are slowly inching back to fair values consistent with supply and demand fundamentals, Galimberti said.
“The Chinese government’s announcement of its largest stimulus package since the pandemic, combined with the sudden rise of geopolitical tension in the Middle East and the threat of another hurricane in the Gulf Coast, has dealt a blow to the bearish sentiment that dominated the oil markets in the past three weeks,” Galimberti said.
Recommended Reading
Marketed: Berlin Resources’ Anadarko Basin Opportunity
2024-07-22 - Berlin Resources has retained EnergyNet for the sale of an Anadarko Basin opportunity in the Montgomery 18/19 BO #1H, located in Ellis County, Oklahoma.
Exxon Explores Sale of Conventional Permian Basin Assets
2024-08-27 - Exxon Mobil, which closed a $60 billion takeover of Pioneer Natural Resources this year, is exploring selling legacy conventional assets in the Permian Basin.
Mike Wirth: The ‘Remarkable’ Rise Of Chevron’s Permian Portfolio
2024-08-20 - Chevron aims to grow Permian volumes past 1 MMboe/d in 2025—less than a decade after it averaged less than 100,000 boe/d from legacy holdings in West Texas and New Mexico, Chevron CEO Mike Wirth said.
APA Executive: After Recent Divestitures, ‘More to Come’
2024-08-19 - At the EnerCom Denver conference, an APA Corp. executive didn’t address reports that APA was shopping up to $1 billion in Permian Basin assets, but he said the company is looking to shed $2 billion in term loans associated with its purchase of Callon Petroleum.
APA Divests $950 Million in Non-core Permian Basin Assets
2024-09-13 - APA Corp. said it would sell assets in the Central Basin Platform, Texas and New Mexico Shelf and Northwest Shelf that average 21,000 boe/d, 57% oil.
Comments
Add new comment
This conversation is moderated according to Hart Energy community rules. Please read the rules before joining the discussion. If you’re experiencing any technical problems, please contact our customer care team.