Oil Price Fundamental Daily Forecast – Supported by Russian Output Cuts, China Demand Resurgence

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are moving higher for a second session on Friday as worries about tighter supplies offset a jump in U.S. crude inventories and concerns over a slowdown in global economic activity. Meanwhile, China continues to recover from COVID lockdowns. This should help ease some of the demand worries.

At 10:48 GMT, April WTI crude oil is trading $76.04, up $0.65 or +0.86% and April Brent crude oil is at $82.96, up $0.75 or +0.91%. On Thursday, the United States Oil Fund ETF (USO) settled at $66.38, up $1.46 or +2.25%.

Russia Plan Deep March Oil Export Cuts

In a potentially bullish move, Russia plans to cut oil exports from its western ports by up to 25% in March versus February, exceeding its announced production cuts in a bid to lift prices for its oil, three sources in the Russian oil market said, according to Reuters.

Russia had already announced plans to cut its oil production by 500,000 barrels per day in March, amounting to 5% of its output or 0.5% of global production.

China Set for Record Crude Oil Imports in 2023

China is expected to import a record amount of crude oil in 2023 due to increased demand for fuel as people travel more following the dismantling of COVID-19 controls and as a result of new refineries coming onstream, analysts said.

The prospect of strong demand from the world’s biggest importer will be another bullish factor for an oil market already supported by the OPEC+ producer group’s output cuts and western sanctions on Russian exports.

China’s crude imports may rise between 500,000 and 1 million barrels per day (bpd) this year to as high as 11.8 million bpd, reversing previous two years’ decline to exceed 2020’s record of 10.8 million bpd, according to analysts from four industry consultancies – Wood Mackenzie, FGE, Energy Aspects and S&P Global Commodity Insight.

IEA Also Sees Resurgence in China 2023 Oil Demand

China will make up nearly half of this year’s oil demand growth after its COVID-19 curbs, the International Energy Agency (IEA) said on Wednesday, but restrained OPEC+ production could mean a supply deficit in the second half.

“Supply from OPEC+ is projected to contract with Russia pressured by sanctions,” the Paris-based agency said in its monthly oil report.

“World oil supply looks set to exceed demand through the first half of 2023, but the balance could quickly shift to deficit as demand recovers and some Russian output is shut in.”

Short-Term Outlook

Crude oil traders appear to have quickly recovered from worries about rising interest rates, while shifting their focus to tighter supply due to Russian production cuts.

Meanwhile, helping to support a longer-term bullish outlook are reports of a steady demand recovery in China that could eventually lead to a supply deficit in the second half of 2023 if the IEA’s forecast proves to be valid.