- Oil heads for a weekly gain amid expectations of a rebound in Chinese demand and less aggressive interest rate hikes
- Feb ’23 WTI gained nearly $4.50, or 6.5%, this week to trade around $78/Bbl
- The market continues to be optimistic about a recovery in Chinese demand as the country lifts Covid restrictions ahead of the country’s Lunar New Year travel season
- China also increased purchases of crude after refiner quotas were increased
- Crude gained for the sixth consecutive day yesterday after US CPI data was in line with expectations
- Inflation moderated for the first time monthly since 2020, signaling that the Fed won’t have to accelerate the pace of future rate hikes
- The USD Index (DXY – a proxy for U.S. Dollar strength against a basket of six international currencies) fell to the lowest in nearly seven months
- A weaker dollar (DXY Index) can cause foreign buyers of dollar-denominated commodities to pay more for the same amount of goods
- Chinese oil consumption is expected to hit a record high this year as the nation abandons its Covid Zero policy (BBG)
- According to the median prediction of 11 China-focused consultants surveyed by Bloomberg, daily demand, which decreased last year, will increase by 0.8 MMBbl/d in 2023
- According to the survey, that would bring usage to an all-time high of almost 16 MMBbl/d
- China’s demand is important as it is nearly half of the global demand growth in 2023, which is expected to grow anywhere from 1.0 to 1.7 MMBbl/d
- China increased crude purchases from markets in North America, West Africa, the North Sea, and the Mediterranean this week for arrival in March and April (BBG)
- The volumes of US and Canadian grades, including Mars, WTI, Midland, and Cold Lake that have been purchased over the last few weeks are estimated to be approximately 10 MMBbl, the most since October
- Additionally, UNIPEC, a major oil trader, also purchased about 6 MMBbl of Caspian CPC Blend this week
- Demand is expected to rise in China, particularly after the Lunar New Year at the end of this month