Julian Evans-Pritchard, a senior China economist at the consultancy Capital Economics, said: “We think the outlook will remain challenging in the coming months as exports turn from tailwind to headwind, the property downturn deepens, and virus disruptions remain a recurring drag.”
As one of the world’s biggest energy consumers, weaker growth in the Chinese economy would drag down demand for crude and other natural resources. Energy traders are also eyeing the potential for a nuclear deal between Iran and western negotiators that could pave the way for an increase in the supply of oil.
The global oil price has dropped from a peak close to $140 in March, when concerns over supplies from Russia reached their height. However, prices are still historically high as the war in Ukraine continues, at almost 50% above levels seen at the end of 2019.
Soaring energy prices have been the biggest driver of high inflation in the UK and other advanced economies amid the worsening cost of living crisis.
Bjarne Schieldrop, chief commodities analyst at the Swedish bank SEB, said it was clear that weakness in Chinese oil demand was one of the main reasons why oil prices had fallen back since early June.
“There is little hope that China will change its Covid-19 stance anytime soon and there is a high risk that Chinese demand weakness persists amid continued rolling lockdowns from month to month,” he said.