Oil prices rose on Wednesday, extending the gains of the previous session on optimism that lifting China’s tight COVID-19 restrictions will lead to a recovery in fuel demand at the world’s largest oil importer.
Brent crude futures rose 63 cents, or 0.73%, to $86.55 a barrel as of 0401 GMT, after gaining 1.7% in the previous session.
West Texas Intermediate (WTI) crude futures rose 68 cents, or 0.85%, to $80.56 after gaining 0.4% on Tuesday.
China’s economic growth slowed sharply to 3% in 2022, missing the official target of around 5.5% and marking its second-worst performance since 1976. But the data still beat analysts’ forecasts after China started rolling back its zero-COVID policy in early December. Analysts see 2023 growth rebounding to 4.9%.
OPEC kept its 2023 global demand growth forecast to 2.22 million barrels per day.
The Organization of the Petroleum Exporting Countries (OPEC) said in a monthly report that Chinese oil demand will increase by 510,000 barrels per day (bpd) this year after contracting for the first time in years in 2022 due to COVID measures.
With the recent change in COVID-19 policy giving support to oil prices, hopes are rising that China’s fuel demand will recover.
The upbeat rhetoric about Chinese demand, which OPEC is forecasting for this week, also supported the market sentiment.
According to the surveys, the expectation of a decrease of approximately 1.8 million barrels in US crude oil stocks despite the increasing stocks of petroleum products also supported the market.
On the supply side, oil production from the top shale oil fields in the US will rise by about 77,300 bpd in February to a record 9.38 million bpd, the U.S. Energy Information Administration (EIA) said in an efficiency report on Tuesday.
However, potential supply losses from Russia and the reopening of China could cause the market to shrink rapidly.
Meanwhile, Russia expects Western sanctions to have a significant impact on oil product exports and production, possibly leading to more crude sales.
The market is also watching closely the demand data from China in the International Energy Agency’s (IEA) monthly report to be released on Wednesday.
