Oil prices have extended their losses amid growing concerns that the U.S. Federal Reserve will indicate further interest rate hikes in the coming months, thereby lowering global economic growth and fuel demand. However, the recent surge in China’s tourism industry could help offset some of these losses.
Brent crude oil, the international benchmark for Nigerian oil, fell by 23 cents to $82.82 a barrel, while West Texas Intermediate (WTI) crude oil declined 21 cents to $76.15 a barrel.
The U.S. Fed’s announcement on its latest meeting is expected to project interest rates going higher, raising concerns of a global recession and further dampening fuel demand.
But, the booming Chinese travel industry could provide a silver lining. According to reports, China expects its tourism market to flourish this year, with a busy and robust summer travel season as travellers flock to vacation destinations.
This comes after the Chinese government ended its strict zero-COVID policy, which kept people home for almost three years.
The rise in travel demand in China could also translate into an increase in oil demand. Analysts predict that China’s oil imports will hit a record high in 2023, primarily to meet the increased demand for transportation fuel, as new refineries come on stream.
In a recent note, Daniel Hynes, senior commodity strategist at ANZ Bank, pointed to state-owned PetroChina and Unipec booking 10 supertankers to import oil from the U.S. next month, equivalent to about 20 million barrels of crude, as a sign of China’s rising demand for oil.
Moreover, Vortexa’s head of APAC analysis, Serena Huang, noted that China’s demand for gasoline and jet fuel is expected to recover, which could provide a much-needed boost to the global oil industry.
Despite concerns of an economic downturn and fuel demand loss due to the anticipated rise in U.S. interest rates, China’s booming travel industry and rising oil demand could help cushion the overall price weakness in the global oil market.