Oil traded nearly 2% higher on Thursday as the fundamental situation seems to have shifted from bearish to bullish, pushing the WTI benchmark above the psychological level of $80.
Chinese demand to increase
China’s shift from dreadful zero Covid policies to “unlocking” its struggling economy will increase world oil consumption to record levels this year, according to a forecast published on Wednesday by the Paris-based International Energy Agency.
In the first three months of the year, global oil supplies will surpass demand by 1 million barrels per day, according to the IEA’s monthly report. China’s decision to reopen its economy will be the driving force behind a further constriction of the global gasoline supply.
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The energy watchdog has raised its forecast for China and stated that the annual demand increase will not occur until the second quarter. China’s oil consumption is predicted to rise by 800,000 barrels per day (BPD) to a record 16 million BPD this year, according to the median estimate of 11 China-focused analysts surveyed by Bloomberg News.
ING predicts that global oil consumption would increase by around 1.7 million BPD in 2023, with China accounting for 50 % of the increase. Despite the fact that China’s crude oil imports in 2022 were somewhat lower than the previous year, December crude imports grew by 4% annually for the second straight year, marking the third biggest monthly purchases in 2022, according to figures released on Friday.
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The IEA’s oil demand growth prediction for this year increased from 200,000 barrels per day to 1.9 million barrels per day. It is anticipated that overall annual oil demand would reach 101.7 million barrels per day, a record high, due to rising consumption.
Oil has managed to jump above the critical long-term bearish trend line. The next target for bulls should be at the 200-day moving average, near $93. The support should be at the previous bearish trendline, currently near $78.50.
WTI 1D chart, source: tradingview.com, author’s analysis