Oil edges on concerns of supply

The unknown key factor in 2023 markets will be the market distortions brought about by Russian crude exports, says analyst.
Photo: Jacob Ehrbahn
Photo: Jacob Ehrbahn

Oil climbs on concerns of lacking spare capacity in the market and hopes of demand recovery in China.

A barrel of European reference crudes Brent goes for USD 86.41 on Tuesday morning, against USD 85.23 on Monday afternoon. At the same time, US benchmark West Texas Intermediate trades at USD 80.67, up from USD 79.34.

”The supply concerns that helped oil prices higher overnight likely stemmed from Chevron’s CEO comment that there’s ’not a lot of swing capacity’ in oil markets,” says Commonwealth Bank of Australia analyst Vivek Dhar in a note to Reuters.

”The key unknown for 2023 will be the disruption to Russia’s oil and refined product exports,” he adds,

On Monday, Chevron CEO Mike Wirth said that ships carrying Russian crude needs to travel further distances to access non-sanctioned markets.

He went on saying that oil inventories and swing supplies are limited, which makes the global market vulnerable to disruptions.

Investors are eagerly awaiting China’s oil trade data from January and February to indicate how quickly Chinese demand is to recover from the years of harsh pandemic restrictions.

Increased demand will push prices up.

Elsewhere, US Energy Information Administration is expected to release reports of crude and product inventories for the week which are expected to show decreases for the first time in ten weeks, sending prices climbing.

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