Mixed signals in energy markets have struggled to give any clear direction to oil prices so far this year. While Saudi Arabia and Russia appear to be pinning hopes for higher prices on an economic rebound in China, that bounce may end up a bit smaller than some had hoped, based on growth targets laid out at last weekend’s annual meeting of the National People’s Congress (NPC).
Still, oil production in the western hemisphere remains relatively flat and well-below pre-pandemic highs. Baker Hughes’s tally of active oil rigs in North America shows drilling activity is slowing quickly. Compensation incentives for oil and gas executives have shifted away from production goals and toward profitability metrics in recent years, which could continue to dull the pace of output expansion.
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WTI benchmark crude prices have seesawed between $80.00 and $72.00 per barrel since the start of the year on mixed signals from major producers and consumers alike.
Major OPEC+ producers like Saudi Arabia and Russia appear to focused on boosting prices, but in different ways. For its part, The Saudi Kingdom is raising prices on oil shipped to Asia and Europe. Bloomberg notes that the price hike for oil headed to Asia is the second consecutive increase in as many month, largely reflecting Saudi Arabia’s expectations for a strong recovery in Chinese demand. Though Reuters reports Russia is expected to tighten international supplies by cutting its domestic crude oil production by 500,000 barrels per month in March, as well as slashing oil exports from its western ports by up to 25% MoM, its shipments to China may hit a record high. Tanker tracking consultancies Vortexa and Kpler estimated nearly 43 million barrels of Russian crude oil are set to reach China in March. China is one of the relatively few direct buyers of Russian crude oil remaining, following the imposition of several waves of sanctions and embargoes in the western hemisphere.
China’s influence on the trajectory of global crude markets has been an increasingly significant factor lately, as the country appears to be emerging strongly from a COVID-induced bout of lockdowns throughout 2022, which hampered energy demand in the world’s second-largest economy. Those recovery prospects had a bit of cold water thrown on them this weekend, however, as China’s Premier, Li Keqiang, set this year’s…
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