On Thursday, crude oil fell about 1% as fears of a US recession outweighed hopes that China’s lifting of COVID-19 curbs would boost demand for crude in the world’s top oil importer.
Brent crude fell 94 cents, or 1.1%, to $84.98 per barrel, while West Texas Intermediate (WTI) crude fell 70 cents, or 0.9%, to 79.48 per barrel in the United States.
Fear gripped the market after comments from US Federal Reserve officials raised concerns that the country’s central bank will not stop raising interest rates anytime soon.
Mr. James Bullard of the St. Louis Fed and Loretta Mester of the Cleveland Fed both stated that rates needed to rise above 5% to control inflation in the world’s largest economy.
This offset expected gains as data showed retail sales and manufacturing production fell more than expected in December, raising hopes that the Fed would now ease up on interest rate hikes.
It also overshadowed Chinese support, as the world’s second-largest economy reported positive data that exceeded expectations after the country began rolling back its zero-COVID policy in early December.
According to the International Energy Agency (IEA), China’s reopening will drive global oil demand to a record high of 101.7 million barrels per day this year, an increase of 1.9 million barrels per day from 2022.
The Paris-based agency increased its 2023 demand growth estimate by 200,000 barrels per day from 1.7 million barrels per day in December.
In its closely watched Oil Market Report (OMR) for January, the IEA said that China would account for nearly half of the increase in oil demand this year following the lifting of COVID-19 restrictions.
At the same time, global oil supply growth in 2023 is expected to slow to 1 million barrels per day, down from 4.7 million barrels per day last year, led by the Organization of the Petroleum Exporting Countries and its allies, OPEC+.
It also warned that the European Union (EU) ban on Russian oil products, which goes into effect on February 5, could soon mean that “the well-supplied oil balance at the start of 2023 could quickly tighten as western sanctions impact Russian exports.”
The US Energy Information Administration’s (EIA) crude inventories figure will be released on Thursday after being delayed due to Monday’s Martin Luther King Day federal holiday.
