Oil prices rose on Thursday, as the International Energy Agency (IEA) predicted strong demand from China will lead to a record 101.9 million barrels per day (bpd) in 2023.
Brent crude oil, against which Nigerian oil is measured, gained 0.5% to $85.80 per barrel while the U.S. West Texas Intermediate (WTI) crude oil rose 0.6% to $79.07 per barrel, despite the U.S. Energy Information Administration’s (EIA) report of a 16.3 million barrel build in U.S. crude oil stocks last week, the largest increase since June 2021.
China is expected to account for almost half of the global oil demand growth next year, as it relaxes COVID-19 curbs. However, the surge in U.S. production and swelling inventories, combined with a broad recovery in the U.S. dollar, could limit oil price gains.
The IEA predicts that 1 million bpd of oil production will be shut down by the end of the first quarter, following the European ban on seaborne imports and international price cap sanctions, Investors King reports.
Analysts at Commonwealth Bank have noted that OPEC+ will not look to boost output to compensate for lower Russian output, which means that the onus will be on the United States and other non-OPEC producers to boost output to meet any incremental increase in global oil demand.
Founder of Vanda Insights, Vandana Hari, sees the upward thrust of China, OPEC, and the IEA’s optimistic outlook on oil demand as countering the weight of the U.S. oil stock-build. However, she does not see much more headroom just yet.
Overall, oil prices are expected to swing in a narrow range, caught between the divergent demand-supply dynamics. The narrative of a strong demand revival from China and the prospects of Russia-linked output cuts are jacking up oil prices. However, steadily rising U.S. production and swelling inventories, combined with a broad recovery in the U.S. dollar, act as headwinds for oil prices.
