- Oil extends gains as the market weighs China’s reopening and U.S. monetary policy
- Feb ’23 WTI rose nearly 30c this morning to trade around $75/Bbl
- China made additional progress toward reopening and increased crude import quotas for refiners, fostering optimism for a rebound in Chinese demand
- However, there are concerns that a relaxed policy, coupled with an uptick in domestic travel prior to the nation's Lunar New Year, could result in a surge in Covid cases
- Two U.S. Federal Reserve officials said on Monday that the Fed policy rate, which is currently at 4.25% to 4.5%, would need to be raised incrementally to 5.0-5.25% to control rising inflation rates
- Fed officials further added that they would look to Thursday’s CPI data to determine the pace of future rate hikes
- Despite the G-7 and EU price cap, data from the Russian Energy Ministry's CDU-TEK unit show that Russia's oil output was flat in December (BBG, Reuters)
- In December, Russian producers reported an average daily production of 10.89 MMBbl/d of oil and condensate, down from 10.9 MMBbl/d in November
- The country's Urals grade has been trading significantly below the $60/Bbl price cap at around $37/Bbl, according to Argus
- Additionally, the Russian Energy Ministry said today that it has been working on additional measures to limit discounts to international benchmarks on Russian oil prices after the West imposed price caps
- Goldman says a tighter market may allow OPEC to restore production in 2H2023 (BBG)
- Growing oil demand could force the market back into deficit from June, with the potential tightness causing Brent to rise to $105/Bbl by 4Q23 and allowing OPEC to undo October's output cuts, said the bank in a note to its clients on Monday
- Global oil consumption may increase by 2.7 MMBbl/d in 2023 Y-o-Y, with 1.7 MMBbl/d coming from China, according to analysts Daan Struyven and Yulia Grigsby
- They added that the bloc’s recent focus on remaining "proactive and pre-emptive," along with its forecast of a back-loaded 2.3 MMBbl/d increase in oil demand in 2023, indicate that it is unlikely to reduce output further reduce output