LONDON is expected to account for around 40 per cent of global oil demand this year, as it emerges from strict lockdowns, but the increased use will not take prices back to 2022 levels, a consultancy told Wood Mackenzie on Thursday.
In a base-case scenario, China's economy will grow by 5.5 per cent this year, after it lifted its COVID containment strategy, according to WoodMac.
This would amount to 1 million barrels per day bpd, a 2.6 mln bpd increase in global oil demand this year.
The report said that a high-growth scenario, under which China's GDP rose by 7 per cent, would add 400,000 barrels per day of Chinese demand.
The report said that this year's average price of crude oil would be below the $99 bbl average seen in 2022, as markets have adapted to the chaos caused by Russia's war on Ukraine.
Barring a major recession, WoodMac sees Brent rising from current levels of around $75 bbl to average $89.40 bbl this year. The GDP growth scenario in China would add up to $5 bbl.
After this month's market turmoil in the banking sector, the group said it did not see major changes to fundamentals of supply and demand and expects oil prices to rebound losses, Mark Williams, WoodMac's research director for short-term oils, told reporters at a briefing.
In the fourth quarter, global refining margins are set to decline to around $6 bbl, compared to $11 bbl a year ago, according to WoodMac, as additions to global refining capacity outpace demand growth for transport fuels.
The report found that the GDP growth scenario would lower China's exports of gasoline, jet, diesel, and gasoil as domestic consumption went up, supporting global refining margins by a further 50 cents bbl in the fourth quarter.
We have over 2 mln bpd of refining capacity coming online this year. Williams said that it wouldn't be the end of the world if an additional 100,000 barrels per day of China exports were lost.
In the fourth quarter, the consultancy expects to have crude profit margins of $30 bbl, while gasoline is expected to average $5 -- 6 bbl, Williams said.