Oil Prices Witness a Gradual Boost As Chinese Demand Increases

Oil prices rose more than 1% on Wednesday, recovering from the previous day's drop, as a more optimistic OPEC outlook for Chinese demand helped offset bearish global investor sentiment in the aftermath of recent US bank failures.

Brent crude futures were up 93 cents, or 1.2%, to $78.38 per barrel by 0324 GMT. WTI crude futures in the United States rose 96 cents, or 1.4%, to $72.29 per barrel. The benchmarks fell more than 4% on Tuesday, reaching a three-month low.

"After the recent sharp losses, the oil market has bounced back on its own," said Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd, adding that some investors had taken advantage of the slide to look for bargains.

"The OPEC upgrade in Chinese oil demand outlook also lent support, though investors were still concerned over a cascading financial crisis after the recent collapse of U.S. banks," he said, noting that whether WTI can stay above $70 a barrel is being closely watched.

The Organization of Petroleum Exporting Countries (OPEC) raised its forecast for Chinese oil demand growth in 2023 due to the relaxation of the country's COVID-19 curbs, but left the global demand total unchanged, citing potential downside risks to global growth.

According to data released on Wednesday, Chinese refineries processed 3.3% more crude in the first two months of 2023 than in the same period the previous year, owing to fuel export policy and independent refiners processing more in response to improving margins for transportation fuels after Beijing lifted COVID restrictions.

According to Stefano Grasso, senior portfolio manager at 8VantEdge in Singapore, China's demand recovery is positive for oil prices.

"The consensus is that the oil supply-demand balance will tighten in the second half, driven by China rebound, unless a severe global recession hits," he added.

The Organization of Petroleum Exporting Countries (OPEC) raised its forecast for Chinese oil demand growth in 2023 due to the relaxation of the country's COVID-19 curbs, but left the global demand total unchanged, citing potential downside risks to global growth.

According to data released on Wednesday, Chinese refineries processed 3.3% more crude in the first two months of 2023 than in the same period the previous year, owing to fuel export policy and independent refiners processing more in response to improving margins for transportation fuels after Beijing lifted COVID restrictions.

According to Stefano Grasso, senior portfolio manager at 8VantEdge in Singapore, China's demand recovery is positive for oil prices.

On the supply side, Saudi Arabia's energy minister, Prince Abdulaziz bin Salman, told Energy Intelligence in an interview on Tuesday that the OPEC+ alliance, which includes Russia, will stick to the production cuts agreed in October until the end of the year.

The International Energy Agency (IEA) will release its monthly report later on Wednesday, and the United States Energy Information Administration (EIA) will release weekly inventory data at 10:30 a.m. EDT.