The bet on the recovery of Chinese demand after ending the strict zero Covid policy to contain the pandemic remains at the forefront of the factors that support the rise in oil prices, and from this standpoint, some international institutions such as Morgan Stanley raised their expectations for the growth of global oil demand during this year.
“The key to oil demand growth in 2023 will be China’s return from movement restrictions, and the impact this will have on the country, the region and the world.” According to the latest OPEC report.
For the first time in months, OPEC raised its expectations for the growth of global oil demand in 2023 by 100,000 barrels per day compared to last month’s expectations, to reach 2.3 million barrels per day in 2023.
OPEC expected China’s oil demand to rise by 590,000 barrels per day in 2023, after a decline in 2022.
The International Energy Agency also confirmed in its latest report that China will be responsible for about half of the growth in oil demand this year after it lifted the restrictions related to Corona, expecting that China’s oil demand will increase by 590 thousand barrels per day in 2023 after its decline in 2022.
In this context, the international energy advisor, Amer Al-Shobaki, indicates in statements to “Sky News Arabia Economy” that the markets are now counting on the ability of the Chinese economy to restore full economic activity, since China is the largest importer of oil in the world, but since half of Chinese exports go to The United States and Europe, the slowdown in economic activity in these countries will affect industrial activity in China, which has recovered about 88 percent of transport traffic.
global economic slowdown
On the other hand, the slowdown in the global economy threatens oil prices, given that this means a decline in demand for black crude.
In this context, the International Monetary Fund forecasts indicate that global economic growth will slow from 3.4% in 2022 to 2.9% in 2023.
However, despite this, all the expectations of international institutions still suggest that the global demand for oil will continue to grow during 2023, or even reach its highest levels ever.
Impact of sanctions on Russia
At the same time, the markets are trying to assess the impact of recent restrictions on Russian oil flows to the markets, on the one hand supporting Russia’s announcement of its intention to cut production by about 500,000 barrels per day in March, oil prices, while Reuters indicated, quoting its sources, that Moscow plans to reduce its production in March, specifically from the ports. West is even higher.
In this context, the energy consultant Al-Shobaki indicates that this additional reduction from Russia may help absorb some of the additional supply in the markets during the first quarter of this year, unlike the second quarter in which the picture will be different because supply will equal demand and oil prices will move up.
On the other hand, the continuation of Russian oil flows to the markets smoothly until this moment, despite the price ceiling and the European embargo, has returned to form a factor of pressure on prices after expectations were suggesting a rapid decline in Russian oil production and exports. The International Energy Agency, for example, was likely to drop Russian production by about 3 million barrels. daily, which did not happen.
As for the US dollar and tightening monetary policy, it is still a double-edged sword for oil prices. Markets betting on the slowdown in tightening US monetary policy during this year means potential weakness in the dollar, and thus support for oil prices, which have a negative relationship with the green currency.
However, the continued rise in inflation in the United States and the Fed’s adherence to continuing to raise interest rates until inflation returns to target levels, according to what was revealed in the latest minutes of the meeting, may mean continued strength of the US dollar.
For his part, Dr. Mamdouh Salameh, a global oil expert residing in London, attributes the fluctuation in oil prices to several reasons, saying: “China’s role in increasing demand pushes prices up, but the US Federal Reserve’s attempts to control inflation pushes it to raise interest rates significantly, which affects Some extent on the global demand for oil, and thus leads to a reduction in prices, albeit slightly.
Dr. Salama explains the intended attempts by the United States to influence oil prices, saying: “Whenever oil prices start to rise, we notice that the US Energy Information Administration is quick to announce an increase in US inventories, which may be false, because they say that the US demand for gasoline And diesel is on the rise, so how is the stock rising if that is true We can consider this announcement to be a coincidence if it happened once, but the matter is repeating itself, as the US Energy Information Administration announces that the stock is rising and the aim of that is undoubtedly to influence on oil prices.
All of these factors lead to fluctuations in oil prices, i.e. a rise, then a decrease, then a rise, but the most important thing is that oil prices are expected to continue to rise, bringing the price of Brent crude to $90 per barrel during the first half of this year, to touch $100 a barrel before the end of the year. This year, according to international oil expert Dr. Salama.
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