Slowing the pace of rate hikes is a “glimmer of hope”
Follow up – the new morning:
Oil prices rose during trading yesterday, continuing their gains for the second session, supported by the growth of the US economy at a better-than-expected pace, and rising hopes for a recovery in demand after the reopening of the Chinese economy.
Brent crude futures rose $1.30, or 1.5 percent, at $88.77 a barrel by 12:14 GMT, according to Reuters.
West Texas Intermediate crude futures rose $1.27, or 1.6 percent, at $82.28 a barrel, marking the highest daily percentage jump in two weeks.
The two benchmarks rose more than 1 percent yesterday, marking gains for the third week in a row. OPEC + delegates meet this week to review oil production levels, with sources from the group expecting to maintain the current production policy.
The Federal Reserve will make its expected decision on interest rates at meetings to be held on January 31 and February 1. The meetings are taking place against the backdrop of falling inflation and faster-than-expected GDP growth of 2.9 percent in the fourth quarter.
“The set of positive data pushed oil prices higher,” said Stephen Brennock, an analyst at BVM.
US GDP and inflation data give a glimmer of hope that the Federal Reserve may slow down the pace of interest rate hikes, reducing fears of contraction in economic activity and the consequent demand for oil.
Meanwhile, the Centers for Disease Control and Prevention said this week, “The number of severe COVID-19 infections in China decreased 72 percent from a peak this month, while the number of hospitalized patients fell 79 percent.”
These numbers indicate the return of the Chinese economy to normal, which reinforces expectations of a recovery in oil demand.
In the context, the Kazakh oil transport company, “Kaz Trans Oil”, increased its oil shipments to China during 2023, as the Kazakh state company provided China with 11.251 million tons of oil through the “Atasu-Alashanko” pipeline. On the other hand, the Kazakh Oil Transport Company shipped 9.438 million tons of crude last year through the Atyrau-Samara pipeline, a decrease of 2.735 million tons.
Oil shipments through the Caspian Sea Pipeline Consortium increased by 656,000 tons to reach 1.146 million tons. The Kazakh company also sent 17.9 million tons of oil to three Kazakh refineries and a bitumen plant, with an increase of 967 thousand tons.
The company’s total shipments decreased by 1.4 percent to 40.656 million tons. A Kazakh minister said, “The country’s oil production decreased by 2 percent year-on-year in 2022.”
“The market is awaiting more clarity about the upcoming European ban on refined Russian products and the subsequent adjustment in flows, while OPEC + delegates head to their next meeting,” analysts at Citigroup said in a note.
“The upcoming EU ban on refined Russian products remains a major source of concern for the market, with widespread disruptions expected,” the analysts added.
There was little change in oil prices after the data showed a smaller-than-expected increase in US crude inventories. And the US Energy Information Administration said, “Crude stocks increased by 533 thousand barrels to 448.5 million barrels in the week ending January 20.” This is far less than expectations of an increase of one million barrels. However, despite this, crude stocks reached the highest level since June 2021.
The rise in inventories limits price gains, as it reflects weak demand for fuel, as well as broader concerns about a global economic slowdown. As sources in “OPEC +” said, “The group, which includes the Organization of the Petroleum Exporting Countries (OPEC) and its allies, is likely to maintain current production levels at the meeting scheduled for February 1.”
In addition, Farhat bin Qadara, head of the Libyan National Oil Corporation, expected the conclusion of more deals with foreign companies, after the Italian company Eni agreed to invest eight billion dollars in the extraction of natural gas in Libya. Bin Qadara told Bloomberg News, “The energy sector has not witnessed investment of this magnitude in more than a quarter of a century, and this is a clear message to the international business community that the Libyan state has passed the stage of political risks.”
Bin Qadara noted that the National Oil Corporation is negotiating investments in reservoirs and energy infrastructure, such as oil pipelines, with other companies.
Today, Eni and the Libyan National Oil Corporation will sign an agreement in Tripoli regarding the development of two gas fields off the western coast of Libya.
Italian Prime Minister Giorga Meloni is preparing to visit Libya soon to boost energy supplies after stopping Russian gas supplies.
“The two fields expected to be developed are located in the Mediterranean Sea off the coast of Libya, and their production capacity could reach 850 million cubic feet per day,” Bloomberg agency quoted Bin Qadara on Wednesday.
Libya currently exports gas to Italy via the Green Stream pipeline, although it is not operating at full capacity. Libya has one of the largest reserves of natural gas and oil in Africa. Its geographical proximity to Europe makes it one of the largest energy suppliers to it.
