Oil prices climb by $2 amid forecasts for 2023 demand uptick
Dec 14 (Reuters) –
Oil settled up more than $2 on Wednesday after OPEC and the International Energy Agency (IEA) forecast a rebound in demand over the course of next year and as U.S. interest rate hikes are expected to ease further alongside slowing inflation.
Brent crude futures settled up $2.02, or 2.4%, to $82.70 per barrel, while U.S. West Texas Intermediate (WTI) crude futures settled up $1.94 to $77.28.
Both contracts rose on a surge in diesel futures ahead of cold weather expected towards the end of the year.
The Brent contract has returned to a backwardated market structure
The structure had dipped into contango last week, with front-month deliveries cheaper than later-loading ones.
Oil prices have been supported by a leak and outage of TC Energy Corp’s Keystone Pipeline, which ships 620,000 barrels per day of Canadian crude to the United States.
Officials said the cleanup will take at least several weeks.
Sending bearish signals, U.S. crude oil stockpiles rose by more than 10 million barrels last week, the most since March 2021, buoyed by releases from the Strategic Petroleum Reserve and as refiners reduced activity.
Looking into 2023, OPEC said it expects oil demand to grow by 2.25 million barrels per day (bpd) over next year to 101.8 million bpd, with potential upside from China, the world’s top importer.
The IEA, seeing Chinese oil demand recovering next year after a 400,000-bpd contraction in 2022, raised its 2023 oil demand growth estimate to 1.7 million bpd for a total of 101.6 million bpd.
Road and air traffic in China have rebounded sharply, data suggests.
“The setup remains supportive of triple digit prices … The recent volatility presents a good entry point ahead. Balances may be looser for the next quarter, but by 2Q a new price rally will be upon us,” said Oswald Clint, an analyst at Bernstein.
The Federal Reserve raised its benchmark overnight interest rate by 50 basis points on Wednesday, a downshift from the 75-basis-point hikes it had delivered at its last four policy meetings. (Additional reporting by Shadia Nasralla in London, Sonali Paul in Melbourne and Emily Chow in Singapore; Editing by Jason Neely, Kirsten Donovan and Paul Simao)
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