Weaker Chinese energy demand could bring the recent oil price surge to an “abrupt end” as a credit squeeze hammers crude imports by the Asian powerhouse, energy consultancy CGES warned on Monday. Oil prices have jumped by about 20 percent over the past

month on increased hopes of economic recovery and soaring Chinese crude imports.

“If China’s oil imports begin to flag, as seems to be happening, this
support for oil prices is likely to disappear as quickly as it
materialised,” the Centre for Global Energy Studies (CGES) said in a
monthly report.

“If this happens, the bullish sentiment of futures market players could
prove shortlived, bringing to an abrupt end the recent surge in oil
prices.

“The sustainability of China’s recovery and its recent spate of oil
buying could thus prove critical for oil prices over the coming
months,” CGES added.

Oil prices fell on Monday, after sharp pre-weekend losses, as stock
markets slid following a surprisingly weak US consumer confidence
report.

China is the world’s second-biggest oil-consuming nation after the
United States and official data published last week showed the Asian
nation’s crude imports had hit a record high of 4.635 million barrels
per day (mbpd) in July.

But CGES noted on Monday that “the boom in Chinese commodity imports
appears to have run out of steam … with the rise in (oil) prices and
a drying up of cheap loans.”

In July last year, oil prices hit record peaks above 147 dollars a barrel on worries about potential supply disruptions.

The market then collapsed because of weak energy demand arising from
the world financial crisis, striking 32 dollars in December.

Oil prices have more than doubled since the start of the year amid
tentative hopes of a global economic rebound — trading at around 65
and 70 dollars.

Source: AFP

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