©Reuters. FILE PHOTO: Storage tanks are seen at Marathon Petroleum’s Los Angeles Refinery, which processes domestic and imported crude oil into California Air Resources Board (CARB) gasoline, CARB diesel fuel and other petroleum products, in Carson, California, USA.
By Laura Sanicola
(Reuters) – Oil prices rose more than $2 on Wednesday, after OPEC and the International Energy Agency (IEA) both forecast a recovery in demand over the course of next year and as US rate hikes are expected to ease alongside slowing inflation .
futures were up $1.88, or 2.3%, to $82.56 a barrel at 11:55 a.m. EDT (1655 GMT), while US West Texas Intermediate (WTI) crude futures were up $1.82 to $77.21. Both contracts were up more than $2 earlier in the session.
The Brent contract has returned to a backward market structure with barrels loaded in the first month trading higher than later deliveries, suggesting that oversupply concerns are abating.
The structure had plunged into contango last week, with deliveries in the first month cheaper than deliveries loaded later.
Looking to 2023, OPEC said it expects oil demand to grow by 2.25 million barrels per day (bpd) next year to 101.8 million bpd, with potential benefit from China, the world’s largest importer.
The IEA saw China’s oil demand recover next year after contracting 400,000 barrels per day in 2022 and raised its estimate for oil demand growth for 2023 to 1.7 million barrels per day for a total of 101.6 million barrels per day.
Road and air traffic in China has recovered strongly, data suggests.
“Setup continues to support triple-digit pricing… Recent volatility provides a good starting point for the future. Balance sheets may be looser for the next quarter, but another price rally will be upon us by the second quarter,” said Bernstein analyst Oswald Clinton.
The US consumer price index rose 0.1% in November after rising 0.4% last month, fueling hopes of a slowdown in interest rate hikes, which could in turn support oil prices.
U.S. Federal Reserve policymakers are expected to raise interest rates by 50 basis points later on Wednesday, a slowdown from the 75 basis points they have held since June.
Oil prices were supported by a leak and malfunction of TC Energy (NYSE:) Corp’s Keystone Pipeline, which ships 620,000 barrels per day of Canadian crude to the United States.
Officials said cleanup will take at least several weeks.
As bearish signals, oil inventories rose more than 10 million barrels last week, the highest number since March 2021, supported by the release of the Strategic Petroleum Reserve and refiners cutting operations. [EIA/S]