Oil: Lower demand in the US and uncertain recovery in China

Oil prices took a breather Thursday after a three-session run-up. Recovering demand in China remains the main driver of higher prices, but concrete signs of recovery are uncertain due to a new wave of contamination in Covid-19. In addition, demand for oil in the United States, the largest consumer of crude oil, is declining and is "a major problem".

Share:

Gain full professional access to energynews.pro from 4.90$/month.
Designed for decision-makers, with no long-term commitment.

Over 30,000 articles published since 2021.
150 new market analyses every week to decode global energy trends.

Monthly Digital PRO PASS

Immediate Access
4.90$/month*

No commitment – cancel anytime, activation in 2 minutes.

*Special launch offer: 1st month at the indicated price, then 14.90 $/month, no long-term commitment.

Annual Digital PRO Pass

Full Annual Access
99$/year*

To access all of energynews.pro without any limits

*Introductory annual price for year one, automatically renewed at 149.00 $/year from the second year.

After three consecutive sessions of gains, oil prices paused on Thursday, as demand fell short of supply in the U.S. and an uncertain recovery in China. At 10:30 GMT, North Sea Brent crude for April was trading at $85.45 a barrel, up 0.42%, while its U.S. equivalent, WTI for March, was at $78.77, up 0.38%.

 

The recovery of demand in China

The recovery of demand in China is the main driver of the rise in oil prices. In January, the country imported 11 million barrels per day, and although a slight decline is expected in February, demand is expected to remain stable, according to SPI analyst Stephen Innes. The country’s reopening is raising investor hopes, but it remains “turbulent” due to a new wave of contamination in Covid-19 and a lack of concrete signs of demand recovery, eroding investor hopes.

 

Oil demand in the United States

Demand for oil in the United States, the largest consumer of crude, is also a key factor to watch. James Harte of TickMill Group reminds us that this is “a major issue” as recent industry data shows that declining demand in the U.S. is a strengthening trend. The weekly report from the U.S. Energy Information Agency (EIA) showed an increase in commercial crude oil reserves of 2.4 million barrels last week in the U.S., and U.S. crude oil production continued to rise.

 

The natural gas market

On the natural gas side, the Dutch TTF futures contract, considered the European benchmark, was trading at 54.81 euros per MWh, nearing its lowest price since early September 2021. With temperatures expected to remain above average for the next two weeks, significant drawdowns of gas stocks are unlikely to occur, according to Energi Danmark. Analysts believe that “Europe will emerge from the winter in a very strong position for the remainder of 2023.”

Texas-based utility CPS Energy acquires four natural gas power plants from ProEnergy for $1.39bn, strengthening its footprint in the ERCOT market with operational dual-fuel infrastructure.
GATE Energy has been appointed to deliver full commissioning services for bp’s Kaskida floating production unit, developed in partnership with Seatrium in the deepwater Gulf of Mexico.
MCF Energy has completed drilling of the Kinsau-1A well in Bavaria at 3,310 metres, reaching its geological targets with hydrocarbon presence, reaffirming the company’s commitment to its European gas projects.
A Ukrainian national arrested in Italy will be extradited to Germany, where he is suspected of coordinating the 2022 attack on the Nord Stream 1 and 2 gas pipelines in the Baltic Sea.
Starting the ban on Russian gas as early as 2026 would raise benchmark prices, with a spread close to $1/MMBTU in 2026–2027 and spikes above $20/MMBTU in Austria, Hungary and Slovakia, amid tight regional supply and limited LNG availability.
Cairo has concluded three new exploration agreements with Apache, Dragon Oil and Perenco, for a total investment of over $121mn, as national gas output continues to decline.
A Syrian vessel carrying 640,000 barrels of crude has docked in Italy, marking the country’s first oil shipment since the civil war began in 2011, amid partial easing of US sanctions.
The Iris carrier, part of the Arctic LNG 2 project, docked at China’s Beihai terminal despite US and EU sanctions, signalling intensifying gas flows between Russia and China.
Blackstone Energy Transition Partners announces the acquisition of a 620-megawatt gas-fired power plant for nearly $1bn, reinforcing its energy investment strategy at the core of America’s digital infrastructure.
Canadian crude shipments from the Pacific Coast reached 13.7 million barrels in August, driven by a notable increase in deliveries to China and a drop in flows to the US Gulf Coast.
Faced with rising global electricity demand, energy sector leaders are backing an "all-of-the-above" strategy, with oil and gas still expected to supply 50% of global needs by 2050.
Argentina aims to boost gas sales to Brazil by 2030, but high transit fees imposed by Bolivia require significant public investment to secure alternative routes.
London has expanded its sanctions against Russia by blacklisting 70 new tankers, striking at the core of Moscow's energy exports and budget revenues.
The accelerated arrival of Russian cargoes in China has lowered Asian spot LNG prices, but traffic is set to slow with the seasonal closure of the Northern Sea Route.
Nigeria and Libya have initiated technical discussions on a new pipeline project to transport Nigerian gas to Europe through the Mediterranean network.
Iraq is negotiating with Oman to build a pipeline linking Basrah to Omani shores to reduce its dependence on the Strait of Hormuz and stabilise crude exports to Asia.
Shipments of liquefied natural gas and higher pipeline flows strengthen China’s gas optionality, while testing the sanctions regime and reshaping price–volume trade-offs for the next decade.
The Canadian government aims to reduce approval delays for strategic projects, including liquefied natural gas, nuclear and mining operations, amid growing trade tensions with the United States.
French steel tube manufacturer Vallourec has secured a strategic agreement with Petrobras, covering complete offshore well solutions from 2026 to 2029.
Increased output from Opec+ and non-member producers is expected to create a global oil surplus as early as 2025, putting pressure on crude prices, according to the International Energy Agency.

Log in to read this article

You'll also have access to a selection of our best content.