Oil Mixed And China Disappoints, But Birol Optimistic About 2024 Market

Meanwhile, analysts discuss Red Sea impact on shipping costs: File Image/Pixabay 

Oil trading remained rudderless on Wednesday, with concerns of winter weather slowing U.S. production output offset by sub-par economic growth from China.

Brent settled down 41 cents to $77.88 per barrel, while West Texas Intermediate settled up 16 cents at $72.56.

The loss of up to 700,000 barrels per day (bpd) in North Dakota was said to have pared WTI losses, while news that China's economy in Q4 2023 grew by only 5.2 percent caused Brent's decline.

Priyanka Sachdeva, senior market analyst at Phillip Nova, said the data "doesn't end the headwinds over crude oil demand" and described the Chinese outlook for 2024 and 2025 as "still bleak."

However, further data from China showed that refinery throughput in 2023 rose 9.3 percent to a record high.

Additionally, Fatih Birol, executive director at the International Energy Agency, told the Reuters Global Markets Forum that "If we don't see any major geopolitical surprises, I expect this year a comfortable oil market, a more balanced oil market."

This was in line with the Organization of the Petroleum Exporting Countries (OPEC) projecting strong demand in 2024 and a "robust" boost in oil use in 2025 due to China and the Middle East.

Meanwhile, Rebecca Babin, a senior energy trader at CIBC Private Wealth, addressed the on-going issue that for once didn't overly influence trading behaviour on Wednesday: the Israel-Hamas war.

She said, "Crude has battling fundamental weakness with escalation risk in the Middle East," and "recently, the market has feared the macro downside more than the potential of broader escalation which has yet to disrupt supplies.

"More incidents in the Red Sea may incite some short covering and provide a buffer to the commodity in an otherwise weak fundamental environment."

For its part, Honour Lane Shipping told clients that its carrier contacts think the Red Sea situation might not be solved for at least six months and could last up to a year: "If so, we expect the soaring freight rates and equipment shortage will continue till the third quarter."

Another major player would be significantly affected if HLS's predictions prove accurate: Andy Lipow, president of Lipow Oil Associates, pointed out that "If total Suez Canal tanker transits are over 8 million bpd, the losses to the Canal Authority are probably in the range of $5 to $7 million depending on the mix of tankers going through."