Except the oil companies and oil producing countries from the Organization of Petroleum Exporting Countries (OPEC), others are enjoying the weak price to stimulate demand for one or the other products. However, China thinks it differently. The biggest energy consumer believes that the oil price witnessed a significant drop in the last one-year period. The country’s ruler also decided to suspend any cut in fuel price even as analysts are expecting a further fall next year.
Move Provides A Floor Price For Oil
According to Sanford C Bernstein & Co, China’s decision offered the oil sector a floor price of about $38 a barrel. Most of the countries resorted to hiking the oil price when the energy price was witnessing an uptrend. However, when the price started falling, the full benefits of the oil drop were not passed on to consumers in several countries, especially the developing one. China’s decision is a testimony to such thinking.
However, analysts are taking a different view of the biggest energy consumer’s move not to cut any refined product prices. Analyst Neil Beveridge said that it was the first time that such an action was taken by a country and sent a signal to the OPEC that the oil prices were trending towards cheap.
Demand Increased
China witnessed 10.4% growth in gasoline demand in the first ten-month period of the current year, International Energy Agency said recently. The demand might have come due to the falling trend in the worldwide oil price that started its downtrend in September 2014. China’s move might have surprised at least a section of the analysts as the establishments were forcing the automobiles to trim down their emissions.
The alternate energy meant less dependence on oil and that would result in continued weak demand globally. In November, OPEC boosted its crude production apart from scrapping the output ceiling to defend its market share and put pressure on competing producers. The analyst said that OPEC was ready for a lower oil price to boost demand. All that it wants was to cut down the supply growth of non-OPEC. China is trying to point out that OPEC will gain only moderately. However, it would not likely to succumb to the pressure since it is concerned with its market share.
