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It is a difficult start to the year for oil prices, after the gains it achieved in the first weeks of January faded at the end of the month and the beginning of February by 8% to $79.94 for Brent and 8.6% to $73.39 for West Texas, despite what analysts had expected of a hike. The Federal Reserve raised the interest rate by 25 percentage points and OPEC stabilized its production until the end of the year, but doubts remain about the speed of recovery in Chinese demand for oil, as Chinese economic indicators show a weak recovery even with the recovery of travel and transportation, and persistent fears of a recession in the United States also contributed to In lowering market sentiment, the continued rise in US oil stocks while markets await the impact of Western sanctions on Russian oil and its products.
Brent price fell 2.71%, or $2.23, to $79.94, last Friday, while West Texas fell 3.28%, or $2.49, to $73.39, after the sudden appearance of the US jobs report, adding 517 thousand jobs to the labor market and unemployment dropping to 3.4%, which could stimulate The Federal Reserve decided to raise interest rates at a higher rate and extend its term, and US commercial inventories continued to rise for four consecutive weeks, rising by 4.1 million barrels in the week ending January 27, despite the stability of production at 12.2 million barrels per day and the improvement in US economic growth in the fourth quarter. And the PMI continued to decline from 48.4 in December to 47.4 in January 2023. The Federal Reserve is still sticking to continuing to raise interest rates until inflation is controlled, which supported the rise in the dollar index by 1.22%, or 1.24 points, to close at 102.99 points, and it also raised The European Central Bank and the Bank of England raised interest rates by 50 percentage points last week to bring down record inflation rates.
The optimism about the slowdown in the global economy, and the growth of oil demand in China by about 1.0 million barrels per day, which is half of the growth in global demand, in the second half of 2023, when global oil demand is expected to rise by 1.9 or 2.2 million barrels per day in 2023, according to forecasts from the International Energy Agency and OPEC. However, the International Monetary Fund expects global growth to decline from 3.4% in 2022 to 2.9% this year, which is better than its previous forecast, while the global inflation rate will decline to 6.6% in the same year. On the supply side, the slowdown in US production growth, the shale oil companies’ pursuit of more profits at the expense of increasing their production, the growth in global demand, and the possibility of Russia reducing its production may lead to a supply deficit, which will support prices.
The optimism about the rise in oil prices in the second half of this year, which is what investors and speculators alike are betting on, by reducing the federal interest rate hike or even ending it by the end of the year, may not be achieved, and it can also be said that the pace of Chinese demand growth may be less than It is hoped that the global economic recession will become the defining sign in the growth of oil demand.