Fluctuating Chinese demand has contributed to this year’s volatility in international oil prices. But the latest evolution on the supply side will have immediate geopolitical and financial implications that go well beyond the oil market. Specifically, Saudi Arabia has returned as the most important swing producer and thus the most influential marginal pricesetter. But how long this situation will last is unclear.
China’s consequential demand-side effect on oil prices is widely acknowledged. The country is large, with extensive energy needs and high-intensity use, and depends heavily on external suppliers. And China-driven price effects have been particularly unpredictable this year as the Chinese authorities impose and lift lockdowns under the country’s zero-Covid policy.
The composition of price determinants on the supply side has been far less constant, making the tug of war with demand effects even more intriguing.
