By Adedapo Adesanya
Oil prices rose more than $2 on Wednesday after the Organisation of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) both forecast a rebound in demand over the course of next year.
Brent crude futures gained $1.88 or 2.3 per cent to $82.56 per barrel, while the United States West Texas Intermediate (WTI) crude futures were up by $1.82 to settle at $77.21.
OPEC, in its monthly oil market report, said it expected to see robust global oil demand growth in 2023 with potential economic upside coming from a relaxation of China’s zero-COVID policies, which this year have pushed the country’s oil use into contraction for the first time in years.
The cartel said it expects oil demand to grow by 2.25 million barrels per day over next year to 101.8 million barrels per day, with a potential upside from China, the world’s top importer.
“Although global economic uncertainties are high and growth risks in key economies remain tilted to the downside, upside factors that may counterbalance current and upcoming challenges have emerged as well,” OPEC said in the report.
In the report, OPEC nudged up its 2022 economic growth forecast to 2.8 per cent and left 2023 steady at 2.5 per cent. As well as the relaxation of China’s COVID policy, the report listed other sources of upside, including commodity price weakness.
This was augmented by the International Energy Agency (IEA), which also revised its oil demand growth forecast for both this year and next.
Despite an expected fourth-quarter contraction of global oil demand by 110,000 barrels per day compared to the same period in 2021, recent data on consumption in non-OECD regions have pointed to more resilient demand than expected earlier, the IEA said on Wednesday in its Oil Market Report for December.
The agency now sees global oil demand growing by 2.3 million barrels per day this year, up by 140,000 barrels per day compared to the growth expected in last month’s report. Demand growth in 2023 is expected at 1.7 million barrels per day, an upward revision of 100,000 barrels per day compared to the November estimates. Next year, global oil demand is set to reach 101.6 million barrels per day, the IEA said.
“Despite the seasonal slowdown in world oil demand and continued macro-economic headwinds, recent oil consumption data have surprised to the upside. This was especially apparent in non-OECD regions, including China, India, and the Middle East,” noted the agency.
“Strong gasoil use in key consuming countries outweighs weak European and Asian petrochemical deliveries,” the IEA added.
In supply, the IEA estimates that global oil supply fell by 190,000 barrels per day to 101.7 million barrels per day in November, breaking a five-month uptrend, as Saudi Arabia and other Gulf producers reduced output as part of the OPEC+ pact.
US Federal Reserve policymakers raised rates by 50 basis points later on Wednesday, slowing from the 75-basis-point pace they had stuck to since June.
This is the highest level in 15 years, indicating that the fight against inflation is not over despite some promising signs lately.
Oil prices have also been supported by a leak and outage of TC Energy Corp’s Keystone Pipeline, which ships 620,000 barrels per day of Canadian crude to the United States. Officials said the cleanup would take at least several weeks.
Modupe Gbadeyanka