Adedapo Adesanya
By Adedapo Adesanya
Oil prices rose on Tuesday as a higher global economic growth forecast and escalating tensions in the Middle East offset concerns about Chinese demand.
As a result, Brent crude gained 47 cents to settle at $82.87 a barrel and the US West Texas Intermediate (WTO) crude appreciated by $1.04 to quote at $77.82 per barrel.
The International Monetary Fund (IMF) raised its forecast for global economic growth, upgrading the outlook for the top two largest economies, the US and China, on faster-than-expected easing of inflation.
The lender forecasts global growth of 3.1 per cent in 2024, up 20 basis points of a percentage point from its October forecast, and said it expected unchanged growth of 3.2 per cent in 2025.
While the US is expected to rise by 2.1 per cent, China’s GDP is expected to grow by 4.6 per cent in 2024.
Global trade is expected to expand by 3.3 per cent in 2024 and 3.6 per cent in 2025, well below the historical average of 4.9 per cent, with gains weighed down by thousands of fresh trade restrictions.
Both crude contracts had fallen by more than $1 on Monday as a deepening real estate crisis in China fuelled concerns over demand in the world’s biggest crude consumer after a Hong Kong court ordered the liquidation of property company China Evergrande Group.
Market analysts note that while there are still concerns about China, the fundamentals from a supply risk standpoint showed bullish signs.
The continuing conflict in the Middle East also provided support to the oil market as US President, Mr Joe Biden, said he has made up his mind on how to respond to a drone attack on American soldiers.
Although he was light on details, the American President said the decision came after consultations as he weighs punishing Iran-backed militias without triggering a wider war.
On the supply side, the US began reimposing sanctions on Venezuela this week after the country’s top court upheld a ban blocking the candidacy of the leading opposition hopeful in a presidential election later this year.
Saudi Aramco, the state oil company of the world’s largest exporter, said it had received a directive from the Saudi energy ministry to maintain its maximum sustainable capacity at 12 million barrels per day and not to continue increasing it to 13 million barrels per day.
The Organisation of the Petroleum Exporting Countries and its allies known as OPEC+ will meet on February 1. However, the meeting is unlikely to bring a decision on the group’s oil policy for April but analysts are hoping it could shed some light on production plans.
