For The Oil Market, The China Variable Is Just A Matter Of When Not If

China's oil demand has been negatively impacted by its zero COVID policy. For readers that are familiar with our analysis on this matter, we are estimating ~1.5 to ~2 million b/d of demand reduction because of this policy. According to the IEA, the year-over-year difference is ~613k b/d.

Source: IEA

And you can see the demand variable breakdown here:

Source: IEA

Despite China's oil demand meaningfully dropping in 2022, something interesting has occurred lately. Relative to China's level of seaborne crude imports, China's onshore crude oil inventories are falling.