Oil Dips On U.S. SPR Release, Softened By OPEC Forecast Of Big Demand

Meanwhile, the UAE worries about 2024 supplies: File Image/Pixabay

The U.S. saying it will boost supply and the Organization of the Petroleum Exporting Countries (OPEC) raising demand forecasts had the effect on Tuesday of oil prices incurring more losses but bearish sentiment being curtailed, however briefly.

Brent fell $1.03, or 1.2 percent, to $85.58 per barrel by 1805 GMT, and West Texas Intermediate fell by $1.08, or 1.4 percent, to $79.06 per barrel after the U.S. Department of Energy said it would sell 26 million barrels of oil from its Strategic Petroleum Reserve, which is at its lowest level since 1983.

This is an extension of president Joe Biden's administration last year selling a record 180 million barrels from the reserve to combat sky-high fuel prices, a strategy that did next to nothing to keep money in peoples' wallets.

But traders were in a fairly optimistic mood overall on Monday, thanks to data showing the slowest acceleration in the U.S. consumer price index since late 2021, which they took as something that will keep the Federal Reserve from enacting steep interest rate hikes.

They were also buoyed by OPEC raising its 2023 oil demand forecast by 100,000 barrels per day (bpd), thanks to the reopening of China's economy after its brutal Covid lockdowns had been abandoned.

"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 in its latest monthly report.

But it added, "Concern hovers around the depth and pace of the country's economic recovery and the consequent impact on oil demand"; OPEC expects Chinese demand to grow by 590,000 bpd in 2023, up from last month's forecast of 510,000 bpd.

As far as Suhail Al Mazrouei, energy minister for the United Arab Emirates, is concerned, oil supplies will be a bigger issue than demand not this year but in 2024.

The forward-thinking minister told Bloomberg on Tuesday that "I'm not worried about demand; what worries us is whether we are going to have enough supplies in the future.

"What worries me is the decline that I see in many countries' production."

Al Mazrouei's comments came on the heels of OPEC secretary-general Haitham Al-Ghais warning on Monday that markets are suffering from a "chronic" lack of investment.

But as for 2023, Al Mazrouei believed global oil markets are balanced, a sentiment that supported expectations that the UAE and fellow OPEC producers will maintain  current production targets this year.