Oil rises on China demand hopes and supply concerns

Brent crude rises 1.4 per cent to $84.16 a barrel by 1353GMT while US West Texas Intermediate (WTI) crude for March up 1.4 per cent at $77.43

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Future oil supply shortages are likely to drive prices toward $100 a barrel by the end of the year, according to Goldman Sachs analysts.

By Reuters

Published: Mon 20 Feb 2023, 7:02 PM

Oil prices rose on Monday, buoyed by optimism over Chinese demand, continued production curbs by major producers and Russia’s plans to rein in supply.

Brent crude rose $1.16, or 1.4 per cent, to $84.16 a barrel by 1353GMT. US West Texas Intermediate (WTI) crude for March, which expires on Tuesday, was up $1.09, or 1.4 per cent, at $77.43.

The benchmarks settled $2 down on Friday for a decline of about four per cent over the week after the United States reported higher crude and gasoline inventories.

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The Opec+ producer group comprising the Organisation of the Petroleum Exporting Countries (Opec) and allies including Russia agreed in October to cut oil production targets by 2 million barrels per day (bpd) until the end of 2023.

Separately Russia plans to cut oil production by 500,000bpd, equating to about 5% of its output, in March after the West imposed price caps on Russian oil and oil products.

Analysts, meanwhile, expect China’s oil imports to hit a record high in 2023 to meet increased demand for transportation fuel and as new refineries come on stream.

“The optimism around China today may be responsible for the gains we’re seeing in crude, which would make a lot of sense given it’s the world’s largest importer and expected to recover strongly from the COVID transition,” said Craig Erlam, senior markets analyst at OANDA in London.

China and India have become major buyers of Russian crude since the European Union embargo.

At the same time, future oil supply shortages are likely to drive prices toward $100 a barrel by the end of the year, Goldman Sachs analysts said in a February 19 note.

Prices will move higher “as the market pivots back to deficit with underinvestment, shale constraints and OPEC discipline ensuring supply does not meet demand”, they wrote. — Reuters

Reuters

Published: Mon 20 Feb 2023, 7:02 PM

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