China Stimulus
The normalization of oil storage markets in the Northern Hemisphere; strong demand, aided by China stimulus this year; and continued production discipline supports our view Brent prices likely have bottomed, and will move higher from here. We raised our 2023 Brent forecast $2/bbl to $92/bbl. Our forecast for next year is revised upward by $5/bbl to $120/bbl. Price risk remains to the upside, particularly if KSA exercises its option to extend production cuts of 1mm b/d.
Policymakers will likely continue to stimulate domestic demand via targeted measures and piecemeal stimulus. Yet, the economy will disappoint unless Beijing provides “irrigation-style” stimulus. The latter is not our base case scenario.
Policymakers will likely continue to stimulate domestic demand via targeted measures and piecemeal stimulus. Yet, the economy will disappoint unless Beijing provides “irrigation-style” stimulus. The latter is not our base case scenario.
Policymakers will likely continue to stimulate domestic demand via targeted measures and piecemeal stimulus. Yet, the economy will disappoint unless Beijing provides “irrigation-style” stimulus. The latter is not our base case scenario.
Oil and metals reacted positively to the PBOC's 10 bp cut in the seven-day reverse repo rate, which will be part of the larger monetary and fiscal support needed to revive the economy. While deposit rates at state-owned banks have been reduced, additional rate cuts are expected. On the fiscal side, tax breaks and credit support are planned for the domestic EV market, while authorities are reportedly mulling further assistance for the property market.
Slowing manufacturing PMI indices globally indicate the slowdown in economic activity will persist. Manufacturing demand for commodities will also soften, weighing on industrial commodity prices. Geopolitical tensions and the race to the green energy transition will upend enmeshed global supply chains, which will also impact manufacturing activity. It is possible that stimulus in China will arrest the decline in the state’s manufacturing activity, which will have positive spillover effects to its key trading partners.