Summary
- Trade volumes reduced due to U.S. holiday long weekend
- China ministry meets refiners on Russian oil trade -sources
- India’s Jan. crude imports reach 6-month high on Russian inflows
Oil prices climbed over 1% on Monday, boosted by optimism over Chinese demand, prevailing production curbs by top producers, and Russia’s plans to limit supply. Brent crude settled 1.3% up, or $1.07, at $84.07 a barrel. U.S. West Texas Intermediate crude (WTI) for March, which expires on Tuesday, last increased 1.1%, or 85 cents, at $77.19.
Volumes were reduced on Monday due to a U.S. market holiday for Presidents’ Day.
Both crude benchmarks settled $2 lower on Friday for a drop of nearly 4% over the week after the United States reported larger crude and gasoline inventories.
Analysts predict China’s oil imports to hit a record high this year to satisfy increased demand for transportation fuel and as new refineries come online.
“The optimism around China today may be responsible for the gains we’re seeing in crude, which would make a lot of sense given it’s the world’s largest importer and expected to recover strongly from the COVID transition,” said Craig Erlam, senior markets analyst at OANDA in London.
China and India have become key buyers of Russian crude amid Western sanctions on Russian oil and more recently, embargoes and price caps because of the conflict in Ukraine.
In India, the world’s third-largest oil importer, crude imports surged to a six-month high last month, according to government data.
China’s commerce ministry has met independent oil refiners to talk about their deals with Russia, five sources familiar with the matter said, imports which have saved Chinese buyers billions of dollars.
“The government wants to understand how much independent refiners could possibly buy and their actual appetite for such imports,” said one source with first-hand knowledge of the discussions.
Russia plans to slash oil production by 500,000 barrels per day (bpd), amounting to about 5% of its output, next month after the West placed price caps on Russian oil and oil products.
Buy Crypto NowRussia is part of the OPEC+ producer group comprising the Organization of the Petroleum Exporting Countries (OPEC) and allies, which decided in October to slash oil production targets by 2 million bpd until the end of this year.
Future oil supply shortages are expected to push prices toward $100 a barrel by the end of 2023, Goldman Sachs analysts said in a Feb. 19 note.
Prices will increase “as the market pivots back to deficit with underinvestment, shale constraints, and OPEC discipline ensuring supply does not meet demand”, they wrote.
