Oil prices rose on Monday as China’s optimism about a recovery in demand concerns that insufficient investment will reduce future oil supply, and major producers keep production limits in place.
Brent crude was up 70 cents, or 0.8%, to $83.70 a barrel as of 0720 GMT. March West Texas Intermediate (WTI) crude, due Tuesday, was up 55 cents, or 0.7%, at $76.89 a barrel. The more active April contract was up 0.8% at $77.14.
Benchmarks dropped $2 a barrel on Friday and closed last week down nearly 4% after the US reported higher crude oil and gasoline inventories.
Brent and WTI prices rose slightly this morning following stronger-than-expected CPI and PPI data in the US and selling on the Fed’s latest hawkish comments.
While the US announcement last week that it will sell 26 million barrels of crude oil from the Strategic Petroleum Reserves put downward pressure on the market, global supply looks flat from the previous period after taking into account the production cuts from OPEC+ and Russia.
The group, known as OPEC+, and its allies had decided last October to cut their oil production targets by 2 million barrels per day (bpd) by the end of 2023.
Russia plans to cut oil production by 500,000 barrels per day, or about 5% of production, in March, after the West imposed price ceilings on Russian oil and oil products.
In this context, we continue to see the reopening of China, the world’s largest importer of crude oil, and a recovery in Chinese and global jet demand increasing the upside risk to prices.
Analysts expect China’s oil imports to hit an all-time high in 2023 as demand for transportation fuel rises and new refineries start operating.
China, along with India, has become the largest buyer of Russian crude after the European Union embargo.
At the same time, some analysts said that future oil supply shortages are likely to push prices to $100 a barrel by the end of the year.
Prices are likely to rise with the market’s under-investment, shale oil restrictions, and OPEC discipline causing supply to not meet demand.
