Oil prices picked up further than 1 percent on Wednesday, recovering from the plunge a day earlier, as a stronger OPEC outlook on China’s demand supported in neutralizing falling global investor sentiment in the wake of the recent US bank failure.
Oil prices rebounded more than 1% on Wednesday, recovering from the previous day’s plunge, as a stronger OPEC outlook on China’s demand helped offset bearish global investor mood in the aftermath of the recent U.S. bank failures.
By 19:24 MUT, the price of Brent oil futures had risen 93 cents, or 1.2%, to $78.38 per barrel. West Texas Intermediate oil futures in the United States (WTI) increased by 96 cents or 1.4% to $72.29 per barrel. The benchmarks dropped more than 4% on Tuesday, reaching a three-month bottom.
According to Toshitaka Tazawa, an expert at Fujitomi Securities Co Ltd, “the oil market has bounced back on its own after the recent sharp losses,” adding that some investors had taken advantage of the slide to look for deals.
Although investors were still worried about a flooding financial crisis following the latest fall of US banks, he said that the OPEC upgrade in Chinese oil demand forecast “also gave support.” He also noted that whether WTI can remain above $70 a barrel is being crucially observed.
The Organization of the Petroleum Exporting Countries (OPEC) raised its prediction for Chinese oil demand growth in 2023 on Tuesday as a result of the country’s COVID-19 curbs being loosened, but it maintained its forecast for total global demand, noting possible risks to global growth.
According to data released on Wednesday, Chinese refineries processed 3.3% more crude in the first two months of 2023 compared to the same period a year earlier.
Chinese refineries manufactured 3.3 percent further crude in the first two months of 2023 as contrast to the same period a one year before, data showed on Wednesday, prodded by energy import policy and independent pollutants recycling more in response to perfecting perimeters for transportation energies after Beijing lifted COVID restrictions.
According to Stefano Grasso, a senior portfolio manager at Singapore’s 8VantEdge, the recovery in China’s consumption is positive for oil prices.
Unless a severe global recession occurs, “the consensus is that the oil supply-demand balance will tighten in the second half, led by China rebound,” he continued.
Due to the US Federal Reserve’s sharp interest rate increases over the previous year, worries about risks to other banks were raised in the wake of the failure of Silicon Valley Bank and Signature Bank. That also sparked debate over whether the central bank could reduce the rate at which it was tightening the money supply.
The US inflation figures released on Tuesday met expectations, increasing the likelihood that the Federal Reserve will raise interest rates slightly at its meeting the following week.
Saudi Arabia’s energy minister, Prince Abdulaziz bin Salman, stated in an interview with Energy Intelligence on Tuesday that the OPEC+ alliance, which consists of OPEC and other oil-producing nations like Russia, will adhere to the output cuts decided upon in October through the end of the year.
The International Energy Agency (IEA) will publish its monthly report later on Wednesday and the US Energy Information Administration will post weekly inventory data at 18:30 p.m. MUT.