China’s official data indicated expansion in manufacturing activity, affirming increasing fuel and crude oil demand, which led to the price of oil to rise by 1%.
As the global economy grapples with uncertainty over the consequences of US President Donald Trump’s tariffs, sectors across the market, including oil are recording a slump. Therefore, when China’s official data indicated expansion in manufacturing activity, there was renewed affirmation for increasing fuel and crude oil demand. This led to the price of oil to rise by 1%.
China is the largest importer of crude oil, and the manufacturing data confirms that the expansion was the fastest in three months. This indicates a considerable rise in production, due to new orders and higher purchase volumes.
According to Reuters, Brent crude increased by 1% recording $73.57 a barrel and U.S. West Texas Intermediate crude was at $70.51 a barrel, up by 1.1%. Investors are eagerly awaiting the March 5th meeting of the annual Chinese Parliamentary meeting where more measures to improve the economy will be discussed and unveiled.
This increase in manufacturing activity has assured Beijing of the success of the financial stimulus which was pumped into the economy last year. However, whether this uptrend will be sustained is the million-dollar question, as Trump only recently unleashed his barrage of tariffs.
Trump had threatened to issue 60% tariffs on Chinese goods as soon as he assumed office, but right now, only 20% is in place. Initially, the White House announced 10% tariffs in February due to the fentanyl opioid crisis, and from March 4, an additional 10% tariff will be levied on all imports from China.
While Beijing nearly met the 5% growth target it had set for itself in 2024, the government is eyeing the same figure in 2025 as well. However, analysts are skeptical regarding how Asia’s largest economy will manage to meet this goal, amidst declining demand and the trade war with Washington. Policymakers have pledged to increase fiscal spending and debt issuance and improve monetary easing.
Economic analysts are warning that the recent improvement in the production sector could be short lived, and the next round of tariffs could alter this recent uptrend. Experts are also predicting retaliation from China, suggesting that any decision taken by the government as a response to the additional tariffs could create economic instability on both sides.
This increase in oil prices comes within a week after they dropped by 2%, reaching a two-month low. Brent futures fell by 2.4%, to settle at $73.02 a barrel and U.S. West Texas Intermediate crude fell by 2.5%, costing $68.93 per barrel. This decrease was a result of slowing energy demands, which was prompted by weak economic news from the US and Germany.
However, with China’s recent news, there is renewed hope that demand and consumption of crude oil and natural gas will increase globally. Owing to the past few months of winter and the fast-depleting stock, gas prices across Europe jumped to $100 per barrel oil equivalent in February. Dutch TTF Natural Gas Futures recorded a 4% surge in February, which was an increase not witnessed since February 2023.
Oil prices around the world are becoming more volatile, especially with Trump at the reins. Despite much political instability across the globe, oil prices are predicted to remain steady for a while. Analysts are suggesting any disruption caused by Washington will be equalised by supply from Russia and Ukraine.
Despite the recent breakdown of peace talks between Ukrainian President Zelenskyy and Trump, Europe is working towards ending the conflict. While there is no certainty that the Ukraine crisis will end soon, with Zelenskyy agreeing to sign a mineral deal with the US, negotiations can be renewed.
The OPEC and OPEC+ are also expected to gradually increase oil production from April, thus ensuring that price volatility can be controlled.
