Energy – Oil demand forecasts edge higher
The oil market spent a large part of yesterday trading stronger, however, weaker-than-expected retail sales and manufacturing data from the US appear to have hit sentiment. And oil was unable to escape the broader downward pressure seen in markets.
API numbers released overnight show that US crude oil inventories increased by 7.6MMbbls last week, which was a bit different to the draw the market was expecting. As for refined products, gasoline stocks increased by 2.8MMbbls, whilst distillate inventories fell by 1.8MMbbls.
The IEA released its latest monthly oil market report yesterday, where oil demand growth forecasts for 2023 were increased from 1.7MMbbls/d to 1.9MMbbls/d, which would leave global oil demand at a record 101.7MMbbls/d in 2023. Some upward revisions were made to Chinese oil demand following the reopening and this should leave China making up almost 50% of global demand growth. A large share of demand growth this year is also expected to be driven by jet fuel. As for supply, non-OPEC+ supply is expected to grow by 1.9MMbbls/d, but this will be partially offset by expectations of an 870Mbbls/d decline in OPEC+ supply, largely as a result of Russia. The IEA expects that the oil market will be in surplus over 1Q23, however, will start to tighten from 2Q23 onwards and with more pronounced deficits over 2H23.
The latest trade data from China shows that LNG imports in December totalled 6.6mt, which is the strongest since January 2022, however, still down around 13% YoY. This leaves total LNG imports for 2022 at 63.81mt, a decline of 20% YoY and the weakest annual imports since 2019. China should see a recovery in LNG demand this year given the change in Covid policy.