Summary: The EIA and OPEC have each raised their forecast for global oil demand in the year ahead. Both cited rising Asian demand, specifically from China, to boost buying of crude products. China’s economic resurgence, which was likely delayed by a massive wave of COVID deaths and hospitalizations, has also forced surging exports of Chinese refined products like gasoline and jet fuel to collapse, leaving international markets less supplied than they were when China’s domestic markets were essentially paralyzed by “Zero-COVID” policies.
In response to an expected rise in global demand, the US will continue to lean on its emergency stockpiles, announcing plans to sell another 26 million barrels from their thinning strategic reserve. US production is still struggling to recover to its pre-pandemic levels, which has allowed the OPEC+ coalition to take a larger role in directing the trajectory of oil prices.
Related ETFs: SPDR S&P Oil & Gas Exploration & Production ETF (XOP), Invesco DB Oil Fund (DBO)
Oil demand forecasts for the year ahead are rising again. The International Energy Agency (IEA) raised global demand estimates by 500,000 barrels per day (bpd) for the first quarter, and by 200,000 bpd for the year as a whole. As a result, world consumption will climb by 2 million barrels a day this year to average 101.9 million a day, it said in a monthly report. A recovery in demand from Asian nations will account for 1.4 million bpd of that, with China alone representing 900,000 bpd of that gain. China’s total demand is expected to touch 15.9 million bpd, the IEA said.
The Organization of Petroleum Exporting Countries (OPEC) also increased its forecasts for global oil demand growth this year, raising expectations by 100,000 bpd. Along with slightly raising its forecast for global economic growth, the organization increased its 2023 China growth forecast to 5.2% from 4.8% previously.
Rising Chinese demand will boost demand for many refined products from gasoline to jet fuel, considering Chinese travelers make up the largest group of international tourists from any single nation. Per Reuters, China’s February gasoline exports may fall for a second straight month to just 285,000 bpd, their lowest in eight years as domestic consumption rebounds. That would be down significantly from an estimated 840,000 tonnes in January and reverse a surge in exports throughout the fourth quarter of 2022, which likely eased gasoline prices internationally. China’s jet fuel seaborne exports may also fall in February to 400,000 tonnes versus around 500,000 tonnes in January, two Singapore-based traders estimated.
Earlier this week, MRP covered China’s emergence from a post-lockdown wave of COVID that may have delayed a more robust Chinese economic recovery thus far. Last year, which was characterized by the implementation of strict quarantining rules during spikes in COVID-19 cases, as per China’s “Zero-COVID” policy, the country posted one of its worst economic performances in nearly…
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