Gains in Oil Continue On-Demand Optimism
WTI crude futures reached close to their highest level since early December on Wednesday, closing in on $81, as optimism over China’s rebound of demand following its swift abandonment of the zero-COVID policy outweighed concerns about a global economic downturn.
At the World Economic Forum, a senior Chinese economic official predicted that as COVID infections have peaked this year, the world’s second-largest economy and top petroleum importer will likely return to its pre-pandemic growth trajectory.
On the supply side, investors continued to be concerned about the anticipated effects of the most recent Western sanctions imposed in response to the conflict in Ukraine on Russian flows. Signs of instability elsewhere temper a revival in oil consumption in China. OPEC Secretary General Haitian Al-Ghais said he is “cautiously optimistic” about the prospects for the global economy.
Investors anticipate the International Energy Agency’s (IEA) report on the monthly market outlook later on Wednesday. The expectation that China’s harsh COVID-19 regulations will be relaxed will result in a rebound in gasoline consumption in the world’s largest oil importer drove up oil prices on Wednesday, extending gains from the previous session.
U.S. Oil Production Should Increase to A Record in February
Following a 1.7% gain in the prior session, Brent crude futures were up 52 cents, or 0.6%, at $86.44 a barrel. After rising by 0.4% on Tuesday, U.S. West Texas Intermediate (WTI) crude futures increased by 55 cents, or 0.7%, to $80.73 a barrel.
However, OPEC maintained its 2.22M BPD estimate for world demand growth for 2023. According to Toshitaka Tazawa. Who is an analyst at Fujitomi Securities Co Ltd., “growing anticipation that China’s fuel demand will perk up. After a recent change in its COVID-19 policy offered support to oil prices.”
He stated that the market sentiment was OPEC’s optimistic perspective on China’s demand, further encouraging foreseeing a bullish tone for this week. Oil in greenbacks is less expensive for holders of other currencies, stimulating purchasing.
The price of oil increased at its slowest rate in over a year, with quantities falling due to lower well productivity and production budget cuts brought on by inflation. The EIA predicted American crude oil production in the largest U.S. shale oil region. According to it, Permian in Texas and New Mexico should increase by around 30,400 BPD to 5.64M BPD in February.
The EIA predicted that oil production in the Bakken region of North Dakota and Montana would increase by 20,000 BPD to 1.23M next month, the highest level since November 2020.