Oil prices fall as top crude importer China sets modest economic growth target for 2023

Brent rose 3.6% last week on positive economic data from the Asian country

Workers unload boxes in Beijing. Oil demand is expected to surge to record levels this year, driven by China’s recovery. AP

Oil prices fell in morning trading on Monday after China’s set a modest target for economic growth for this year.

Brent, the benchmark for two thirds of the world’s oil, was trading 1.58 per cent lower at $84.43 a barrel at 3pm UAE time while West Texas Intermediate, the gauge that tracks US crude, fell 1.57 per cent to $78.43 a barrel.

China, the world’s second-largest economy and top crude importer, is aiming for gross domestic product growth of 5 per cent in 2023, lower than its last year's growth estimate of 5.5 per cent, it said on Sunday.

The country’s economy grew by 3 per cent in 2022.

China’s National Development and Reform Commission said the growth target of 5 per cent was “necessary to ensure stable growth, employment and prices”, the official Xinhua news agency reported.

This year's target is consistent with the growth potential of the Chinese economy and with the capability of resources and production factors to support the economy, the commission was quoted as saying.

“It will be a positive signal to the market and will bolster confidence, guide expectations, expand employment, improve living standards and prevent and defuse risks while pursuing development.”

"The fact that the second biggest economy in the world is expected to grow only around 5 per cent has put cold water on the expectations of a strong rally taking place in the black gold," said Naeem Aslam, chief investment officer at Zaye Capital Markets.

"Traders were thinking that the fact China has dismantled its Covid-related policies, we are going to see robust demand, but those expectations are hit today with a dose of reality."

Brent gained 3.6 per cent last week on positive economic data from the Asian country, which has been gradually reopening its economy after following a zero-Covid policy for about three years.

The International Energy Agency expects global oil demand to surge to record levels this year, driven by China’s economic recovery.

Demand is projected to rise by two million barrels per day to 101.9 million bpd in 2023, the Paris-based agency said in its February oil market report. It previously forecast a growth of 1.9 million bpd.

Mike Muller, head of Vitol Asia, said that domestic fuel demand in China was on a rebound.

“We're seeing … reduced exports of petroleum products [from China], in stark contrast to what we had in the fourth quarter when there was a policy directive for Chinese refiners to crank up their runs and maximise exports,” Mr Muller said in an interview with Gulf Intelligence on Sunday.

“Those exports … [have] dried up because domestic margins for domestic consumption [were] good and there seems to be some desire to build inventory, as opposed to putting it into the international marketplace.”