Crude Oil Rises on Chinese Demand, Russia Supply Cut

February 21, 2023
crude oil exports

By Adedapo Adesanya

Crude oil rose by over 1 per cent on Monday, buoyed by optimism over Chinese demand, continued production curbs by major producers and Russia’s plans to rein in supply.

As a result, Brent improved by $1.07 or 1.3 per cent to settle at $84.07 a barrel, and the US West Texas Intermediate crude (WTI) went up by 85 cents or 1.1 per cent to trade at $77.19 a barrel.

Volumes were subdued in Monday’s trading due to Presidents’ Day in the United States, a market holiday.

Analysts expect China’s oil imports to hit a record high in 2023 to meet increased demand for transportation fuel and as new refineries come on stream.

China’s crude imports may rise between 500,000 and 1 million barrels per day this year to as high as 11.8 million barrels per day, reversing the previous two years’ decline to exceed 2020’s record of 10.8 million barrels per day.

This is according to analysts from four industry consultancies – Wood Mackenzie, FGE, Energy Aspects and S&P Global Commodity Insight. Their estimates are in line with the latest forecast by the International Energy Agency (IEA).

With the removal of COVID-19 curbs, domestic consumption is now rising, and lucrative export markets to supply, the four consultancies saw Chinese refineries raising crude throughput by between 850,000 to 1.2 million barrels per day over 2022 levels, for an increase of between 6 per cent to 9 per cent.

Meanwhile, risks remain, including the possibility of a resurgence in COVID infections, and uncertainty over China’s fuel export policy, analysts said.

Also, support came as Russia plans to cut oil production by 500,000 barrels per day, equating to about 5 per cent of its output, in March after the West imposed price caps on Russian oil and oil products.

Russia is part of the OPEC+ producer group comprising the Organisation of the Petroleum Exporting Countries (OPEC) and allies, which agreed in October to cut oil production targets by 2 million barrels per day until the end of 2023.

China and India have become major buyers of Russian crude amid Western sanctions on Russian oil and, more recently, embargoes and price caps because of the Ukraine war.

In India, the world’s third-biggest oil importer, crude imports rose to a six-month high in January, government data showed.

Adedapo Adesanya

Adedapo Adesanya is a journalist, polymath, and connoisseur of everything art. When he is not writing, he has his nose buried in one of the many books or articles he has bookmarked or simply listening to good music with a bottle of beer or wine. He supports the greatest club in the world, Manchester United F.C.

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