Oil futures rose Wednesday to their highest levels since early December as traders remained upbeat about the reopening of China’s economy after Covid restrictions were lifted with the International Energy Agency boosting its forecast for crude demand growth in 2023.
March Brent crude
the global benchmark, was up $1.32, or 1.5%, at $87.24 a barrel on ICE Futures Europe. Both WTI and Brent traded at their highest intraday levels since Dec. 5, according to FactSet.
February natural gas
dropped 4.2% to $3.436 per million British thermal units.
The Paris-based IEA lifted its forecast for oil-demand growth this year by nearly 200,000 barrels a day to 1.9 million barrels a day. The extra demand means that the IEA now expects total oil demand this year to average 101.7 million barrels a day, well above pre-pandemic levels and a record amount.
China’s strict COVID restrictions were seen keeping a lid on crude demand until December, but the country’s rapid lifting of curbs on business and consumer activity has now spurred optimism over the demand outlook, helping to lift crude demand in the new year.
The IEA raised its forecast for Chinese demand by 100,000 barrels a day to 15.9 million barrels a day.
Output data from China showed that oil refiners processed around 14.17 million barrels a day (mb/d) of crude in December, down from 14.69 mbd in November but up 2% year over year, noted Warren Patterson and Ewa Manthey, strategists at ING, in a note. Full-year 2022 numbers averaged 13.57 mb/d, down almost 4% year over year.
“Weaker domestic demand and low refined product export quotas would have weighed on refinery runs through 2022. Activity should recover this year, given the expected recovery in oil demand following China’s reopening, along with the government releasing larger volumes of refined product export quotas more recently,” they wrote.