By Adedapo Adesanya
Crude oil fell by about 1 per cent on Wednesday as possible US recession outweighed optimism that China’s lifting of COVID-19 curbs will fuel demand for crude in the world’s top oil importer.
Brent crude went down by 94 cents or 1.1 per cent to settle at $84.98 a barrel, and the US West Texas Intermediate (WTI) crude depreciated by 70 cents or 0.9 per cent to trade at 79.48 per barrel.
Fear came into the market after comments from US Federal Reserve officials sparked worries that the country’s central bank may not pause interest rate hikes any time soon.
St. Louis Fed President, Mr James Bullard, and Cleveland Fed President, Loretta Mester, said rates needed to rise beyond 5 per cent to control inflation in the world’s largest economy.
This took out gains expected as data showed retail sales and manufacturing production declined more than forecast in December, on hopes the Fed would now ease up on interest rate hikes.
It also overshadowed support that came from China as the world’s second-largest economy reported positive data that beat forecasts after the country started rolling back its zero-COVID policy in early December.
The International Energy Agency (IEA) said that China’s reopening is set to drive global oil demand to a record high of 101.7 million barrels per day this year, up by 1.9 million barrels per day from 2022.
The Paris-based agency raised its demand growth estimate for 2023 by 200,000 barrels per day from 1.7 million barrels per day growth expected in December.
Almost half of the oil demand growth this year will come from China after the country lifted its COVID-19 restrictions, the IEA said in its closely-watched Oil Market Report (OMR) for January.
At the same time, world oil supply growth in 2023 is set to slow to 1 million barrels per day, following last year’s growth of 4.7 million barrels per day led by the Organisation of the Petroleum Exporting Countries and its allies, OPEC+.
It also warned that the European Union (EU) ban on Russian oil products from February 5 could soon mean that “the well-supplied oil balance at the start of 2023 could quickly tighten, however, as western sanctions impact Russian exports.”
Crude inventories figure from the US Energy Information Administration (EIA) will be published on Thursday as it was delayed a day due to Monday’s Martin Luther King Day federal holiday.
