Oil prices rose on Thursday as hopes of a strong recovery in fuel demand in China, the largest oil consumer, offset losses from a stronger dollar and a massive increase in US crude inventories.
Brent crude futures rose 42 cents, or 0.5%, at 0352 GMT to $85.80 per barrel by 0352 GMT, while West Texas Intermediate (WTI) crude futures gained 48 cents or 0.6% to $79.07 a barrel.
The International Energy Agency (IEA) said oil demand will increase by 2 million barrels per day (bpd) in 2023 to a record 101.9 million bpd, up 100,000 bpd from last month’s forecast, with China accounting for 900,000 bpd of the increase.
The Paris-based agency said it will account for almost half of 2023 oil demand growth after China loosens COVID-19 restrictions.
The US dollar, which has generally moved inversely with crude oil prices, rallied after higher US retail sales data and held on to its gains on Thursday.
For now, China’s outlook, OPEC’s forecasts and IEA’s data have offset the weight of the massive oil stocks in the US. Oil prices are expected to oscillate in a narrow range between different demand-supply dynamics.
The Energy Information Administration (EIA) said US crude inventories rose 16.3 million barrels last week to 471.4 million barrels, the highest level since June 2021.
While steadily rising US production and rising inventories, coupled with the broad recovery in the US dollar, act as a headwind for oil prices, strong demand recovery from China and expectations of Russia-related production cuts are pushing oil prices up.
The IEA said that after the ban on imports by sea and international price cap sanctions related to Russia-related production cuts, oil production will stop at around 1 million barrels per day by the end of the first quarter.
In a note, it was noted that OPEC+ would not consider increasing production to compensate for the low production in Russia.
This means that the responsibility for increasing production will rest with the US and other non-OPEC producers, not only to compensate for lower Russian production but also to meet any increase in global oil demand.
