Oil prices dropped in early Asian trade Wednesday for the third consecutive session due to a more-than-expected rise in US crude stocks. A planned release of US strategic oil reserves weighed on prices by stirring up the supply side, while upside demand forecasts by OPEC helped rein in the fall.
Brent crude fell 1% to $84.72 a barrel at 09:49 am GST Wednesday, while US West Texas Intermediate (WTI) crude dropped 1.1% to settle at $78.22 a barrel. Both benchmarks were also down Tuesday and Monday. Last week, oil closed with a gain of more than 8% to notch the best week since October 2022.
US crude inventories jumped by nearly 10.5 million barrels last week, Reuters reported, citing data from the American Petroleum Institute Tuesday. Gasoline stocks were up by nearly 846,000 barrels, while distillate stocks surged by about 1.7 million barrels.
As for the US crude release, it will amount to 26 million barrels of oil from the Strategic Petroleum Reserves (SPR) and will come from two different sites—6 million barrels from Big Hill and 20 million barrels from West Hackberry, according to a statement from the US Department of Energy (DOE) released Monday.
The Organization of the Petroleum Exporting Countries (OPEC) has raised its forecast for global oil demand in 2023 to 2.32 million barrels per day (bpd), mainly because of the easing of COVID-19 restrictions in China and a slightly robust outlook for the world's economy.
The projection is 100,000 barrels per day (bpd) higher than last month's forecast, OPEC said in its monthly report Tuesday, lending support to oil prices.
"Key to oil demand growth in 2023 will be the return of China from its mandated mobility restrictions and the effect this will have on the country, the region, and the world," OPEC said, highlighting concern regarding "the depth and pace" of the country's recovery and its impact on global oil demand.
OPEC sees Chinese demand growing by 590,000 bpd in 2023, marking a growth of 80,000 bpd from the forecast in January, after oil consumption fell in the country last year due to its zero-COVID policy. Further, Middle East oil demand is expected to hit 330,000 bpd in 2023, up 4% from a year earlier.
The oil cartel's report was also optimistic about global economic growth for 2023, setting it at 2.6% from 2.5% last month. However, it warned of a possible slowdown due to peaking inflation and hikes in interest rates.
