Oil price inches high on China’s recovery hopes

January 25, 2023 (MLN): The price of crude oil edged higher on Wednesday as optimism for a recovery in China, and expectations that major producers will maintain the current output policy offset global recession worries, as per Reuters reported.

Today Brent Crude price increased by 0.2% DoD to $86.30 per barrel after a decline of 2.3% in the previous session.

Accordingly, US West Texas Intermediate (WTI) crude oil prices surged by 7 cents (0.1% DoD) to clock in at $80.20 after a 1.8% fall in the last session.

In the week ended January 20, 2023, the US crude stocks rose by about 3.4 million barrels, according to American Petroleum Institute data. That was triple the forecast for about 1 million builds in a preliminary Reuters poll on Monday.

Official data from the U.S. Energy Information Administration will be released later on Wednesday.

Hiroyuki Kikukawa, General Manager of Research at Nissan Securities added, “Expectations that China's fuel demand will recover in the second half of the year are growing and are likely to support market sentiment.”

Kikukawa, however, expects the build "to be temporary as the supply disruptions from a cold snap in the United States a few weeks ago would only impact data in the next couple of weeks".

Official data from the U.S. Energy Information Administration will be released later on Wednesday.

Kikukawa thinks WTI to trade in a range between $75 and $85 a barrel in the coming weeks.

After several COVID-19 restrictions, the reopening of the Chinese economy can unleash a large wave of pent-up demand over the next 18 months, an Analyst from Bank of America Securities said.

“On the supply side, volumes should remain steady for the medium term as the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, are expected to keep their output policy unchanged”, Reuters added.

An OPEC+ panel is likely to endorse the producer group's current oil output policy when it meets next week, five OPEC+ sources said on Tuesday, as hopes for higher Chinese demand are balanced by worries over inflation and the global economy, it added.

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