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.
Crude Oil Dips Slightly on Friday Amid Demand Concerns
On Friday, global crude oil prices experienced a slight dip, primarily attributed to mounting concerns surrounding demand despite signs of a tightening market.
Brent crude prices edged lower, nearing $83 per barrel, following a recent uptick of 1.6% over two consecutive sessions.
Similarly, West Texas Intermediate (WTI) crude hovered around $78 per barrel. Despite the dip, market indicators suggest a relatively robust market, with US crude inventories expanding less than anticipated in the previous week.
The oil market finds itself amidst a complex dynamic, balancing optimistic signals such as reduced OPEC+ output and heightened tensions in the Middle East against persistent worries about Chinese demand, particularly as the nation grapples with economic challenges.
This delicate equilibrium has led oil futures to mirror the oscillations of broader stock markets, underscoring the interconnectedness of global economic factors.
Analysts, including Michael Tran from RBC Capital Markets LLC, highlight the recurring theme of robust oil demand juxtaposed with concerning Chinese macroeconomic data, contributing to market volatility.
Also, recent attacks on commercial shipping in the Red Sea by Houthi militants have added a risk premium to oil futures, reflecting geopolitical uncertainties beyond immediate demand-supply dynamics.
While US crude inventories saw a slight rise, they remain below seasonal averages, indicating some resilience in the market despite prevailing uncertainties.
Nigeria’s Oil Rig Count Soars From 11 to 30, Says NUPRC CEO
The Chief Executive Officer of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Gbenga Komolafe, has announced a surge in the country’s oil rig count.
Komolafe disclosed that Nigeria’s oil rigs have escalated from 11 to 30, a substantial increase since 2011.
Attributing this surge to concerted efforts by NUPRC and other governmental stakeholders, Komolafe highlighted the importance of instilling confidence, certainty, and predictability in the oil and gas industry.
He explained the pivotal role of the recently implemented Petroleum Industry Act (PIA), which has spurred significant capital expenditure amounting to billions of dollars over the past two and a half years.
Speaking in Lagos after receiving The Sun Award, Komolafe underscored the effective discharge of NUPRC’s statutory mandate, which has contributed to the success stories witnessed in the sector.
The surge in Nigeria’s oil rig count signifies a tangible measure of vibrant activities within the upstream oil and gas sector, reflecting increased drilling activity and heightened industry dynamism.
Also, Komolafe noted that NUPRC has issued over 17 regulations aimed at enhancing certainty and predictability in industry operations, aligning with the objectives outlined in the PIA.
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