Page 11 - AsianOil Week 12 2023

POLICY
AsianOil AsianOil

OPEC outlook on China pushed higher,

oil bounces back

CHINA THE Vienna-based Organization of the Petro- quoted of saying in response to the announce-
leum Exporting Countries (OPEC) last week ment by OPEC.
Analysts in mainland increased its 2023 forecast on demand for oil in In China, according to OPEC, demand is
China have pointed Chinese and Chinese territorial markets. now forecast to rise by 710,000 bpd throughout
to gaps in coal supply Analysts in mainland China have pointed to the rest of 2023. The previous month forecast
in some parts of the gaps in coal supply in some parts of the coun- released by OPEC topped out at 590,000 bpd.
country, and LNG try, and LNG supply limitations as being major Tazawa also pointed at a number of investors
supply limitations as causes in an increase in oil demand. using the drop in prices to seek out bargains.
being major causes More official reasons given for the decision As a result, following the 4% market drop to
in an increase in oil made in Vienna focus on a general increase in a three-month low posted on March 14, just two
demand. demand for oil in the wake of COVID lock- days later futures on West Texas Intermediate
downs now largely being seen as a thing of the (WTI) crude were up $0.70 to $72.03 per barrel.
past as China starts to move past the pandemic. Brent futures also climbed by 0.8%, up $0.62
In its monthly report, OPEC said demand for to $78.07 per barrel.
oil would rise by 2.32mn barrels per day (bpd), Tazawa added that whilst there is concern
a figure identical to a month prior even with the on the WTI price keeping its nose above the $70
projected increase in demand from China. mark per barrel, “the OPEC upgrade in Chinese
As a result, oil prices were pushed back north oil demand outlook also lent support, though
after a topsy-turvy few days of ups and downs. investors were still concerned over a cascading
“China’s reopening, following the lifting of the financial crisis after the recent [bank] collapse.”
strict zero-COVID-19 policy, will add consider- Behind the banking crisis were interest rate
able momentum to global economic growth,” the increases by America’s Federal Reserve through-
OPEC report said, continuing: “the rapid rises in out 2022, and into this year, which in part led to
interest rates and global debt levels could cause the March 10 collapse of the Silicon Valley Bank,
significant negative spill-over effects, and may the second-largest bank failure in American
negatively impact the global growth dynamic.” history.
A former chief oil analyst at the OPEC Secre- Two days later this was followed by the col-
tariat, Hassan Balfakeih, called the OPEC report lapse of New York’s Signature Bank, both of
“cautiously optimistic and reflective of current which shook many oil investors.
market fundamentals.” Global inventories were reported as increas-
Balfakeih noted that there is a “favourable ing by 1.2 mn barrels for the week ending March
influence of China's economy fully reopening on 10, while at the same time stockpiles fell accord-
oil consumption” but that “the global economy ing to the American Petroleum Institute (API).
continued to face obstacles such as high inflation Supply was unaffected, however, with Prince
and the conflict in Ukraine, while the continued Abdulaziz bin Salman in an interview just after
recovery of the travel and transportation sectors the US banking collapse saying that OPEC
continues to drive global oil demand.” oil producers in conjunction with their allies
“The oil market has bounced back on its own remain committed to cuts in production agreed
after the recent sharp losses,” Japanese analyst in late 2022, that will remain in place until the
Toshitaka Tazawa at Fujimori Securities was end of 2023. ™

Week 12 24•March•2023 www. NEWSBASE .com P11