Oil Price: Chinese success in controling Covid-19 rekindles the investors' spirit


Chinese Covid-19 recovery August 2021

China, the apparent epicentre of the Covid-19 catastrophe, once again proved once thing it is really good at – keeping the spread at bay.

The data of daily infections, according to Google, shows that the curve is flattening, indeed. In proportion, the Chinese authorities have eased the restrictions that had been in place in major cities.

In light of new development, traffic levels are slowly returning to near normal levels with industries gradually gathering the momentum. 

The awakening of the world’s second largest economy – and the world’s top crude oil importer – has rekindled the sprit in the markets, which saw the worst monthly drop in oil price in August - for months.

The positive sentiment that the investors see with regard to China’s containment of the new wave of the pandemic, is partially responsible for lifting the price of crude oil, despite the warning from the OPEC+ about a surplus of the commodity next year.

If the price of crude oil goes up at an exponential rate, however, the Chinese will feel the pinch once again, as they did in July. China has attributed the rise in cost of raw materials to its slow economic growth, fuelled by the rising oil prices.

In India, the world’s third largest importer, meanwhile, the use of petrol has gone up considerably. It, however, is still lower than that of what it was in 2019.

The use of diesel, meanwhile, remains relatively low in India that has worried the investors; it is the most important fuel in the vast country and the trend clearly reflects the industrial activities.

Unlike in China, the pandemic situation in India does not show any sign of hope of full recovery – unfortunately. On the contrary, the rates of infections are going up in major cities, including the commercial capital, Mumbai.

The pandemic situation in the rest of Asia is worrying too. This may be the reason that OPEC+ predicted surplus of crude oil if they keep increasing the output.

Indonesia, Japan, the Philippines, Vietnam and Thailand are battling widespread outbreaks across their respective countries which could result in a devastating, collective economic setback.

In this context, the success that China achieved in controlling the outbreaks gives the investors a ray of hope amidst a palpable combination of gloom and uncertainty.



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