The expectation that China’s harsh COVID-19 regulations will be relaxed will result in a rebound in gasoline consumption in the world’s largest oil importer drove up oil prices on Wednesday, extending gains from the previous session. Following a 1.7% gain in the prior session, Brent crude futures were up 52 cents, or 0.6%, at $86.44 a barrel. After rising by 0.4% on Tuesday, U.S. West Texas Intermediate (WTI) crude futures increased by 55 cents, or 0.7%, to $80.73 a barrel.
China’s GDP increased by 3% in 2022, falling short of the stated goal of “about 5.5 percent” and representing the country’s second-worst result since 1976. But even with China’s decision to abandon its zero-COVID policy in December, the statistics still exceeded experts’ expectations. Chinese oil demand is expected to increase by 510,000 barrels per day (bpd) this year, according to the Organization of the Petroleum Exporting Countries (OPEC), after experiencing its first decline in years in 2022 as a result of COVID containment measures.
However, OPEC maintained its 2.22 million bpd estimate for the growth of world demand for 2023. A weaker U.S. dollar helped to support oil prices as well; it stabilized on Wednesday after falling against key currencies the day before due to concerns that a potential Bank of Japan policy move could signal a tightening of monetary policy. Oil priced in greenbacks is less expensive for holders of other currencies, which stimulates purchasing.
In terms of supply, the U.S. Energy Information Administration (EIA) reported on Tuesday that oil output from the country’s top shale regions is expected to increase by roughly 77,300 bpd in February to a record 9.38 million bpd. A senior Russian source familiar with the country’s stance stated that Russia anticipates Western sanctions to significantly affect its exports of oil products and its output, likely leaving it with more crude oil to sell.
