Oil Climbs Over Healthy Demand Expectations
Prices of crude oil increased on Wednesday following a positive demand forecast by the International Energy Agency (IEA).
Brent price increased by 0.07% to $82.53 per barrel from $82.47 on Tuesday. The American benchmark, West Texas Intermediate (WTI), traded at the same time at $78.27 per barrel, up 0.01% from Tuesday’s close of $78.26 per barrel.
Apart from IEA’s firmer demand expectation, the Organization of Petroleum Exporting Countries (OPEC) forecasted a rise in demand in 2023.
Oil demand will rise globally in the last quarter of 2023, OPEC’s most recent report predicts, helped by a rebound in the economies of China and other non-OECD countries.
Despite the latest negative data on China’s economic activities, the country’s oil imports saw an increase of 11.4 million barrels per day (bpd) in October.
According to IEA data, global oil demand is set to climb by 2.4 million bpd to 102 million bpd this year, 110,000 bpd more than projected in last month’s report. China leads the growth with a contribution of around 1.8 million bpd.
Limiting further price increases, the American Petroleum Institute (API) late Tuesday announced an estimated increase of 1.3 million barrels in US crude oil inventories, against the market expectation of a build of 1.4 million barrels.
The US Energy Information Administration (EIA) will release actual data on oil stocks later on Wednesday, and if the stock rise is confirmed, prices could continue their downward spiral.
ICE Brent settled marginally lower yesterday despite US inflation rising less than expected, while the IEA also revised up its oil demand forecasts for this year and next in its latest oil market report.
The IEA revised up its 2023 oil demand growth forecast by around 100Mbbls/d to 2.4MMbbls/d, ING commodities strategists said in a note, adding that the increase was a result of Chinese demand hitting record levels.
In addition, analysts said US demand has also been stronger than the agency was expecting saying 2024 demand growth forecasts were increased from 900Mbbls/d to 930Mbbls/d.
Supply has also been performing strongly, with the US, Brazil and Guyana driving supply growth this year, according to commodity market note produced by ING.
The IEA sees a smaller deficit than originally expected in 4Q23 of around 900Mbbls/d and also sees the market returning to a surplus early next year.
“Our balance also shows a surplus in 1Q24 before the market returns to a deficit for most of 2024. However, this surplus will also depend on whether or not the Saudis roll over their additional voluntary supply cut of 1MMbbls/d2, ING said.
In the gas market, Chevron has resumed operations at the Tamar gas field in Israel. The Israeli government ordered the field to shut down due to safety concerns following Hamas’ attack in early October.
The restart of production at the field means that gas flows to Egypt will also increase, which will also ease concern for Europe, given that a tighter Egyptian gas market would mean limited LNG exports from Egypt to Europe over the winter.
On the calendar for today, apart from the usual weekly EIA inventory data for the US, China will also release retail sales and industrial production numbers for October, which will include crude oil and refining output.