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Oil futures extended a slump Wednesday, with the U.S. benchmark dipping below the $70 level and touching its lowest intraday level since December 2021 as the fallout from a banking crisis stoked recession fears.
Investors were also awaiting official data on U.S. crude inventories after industry data was said to show a rise in oil stocks but declines in gasoline and distillate levels.
Trouble…
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A better-than-expected response to Europe’s energy crisis and surprising economic resilience among major Asian economies are boosting demand for oil as a heat source, the International Energy Agency said Wednesday as it lifted its forecast for global crude demand.
The Paris-based energy watchdog raised its oil
CL.1,
BRN00,
demand growth forecasts for 2022 by 140,000 barrels a day to 2.3 million barrels a day. For 2023, the IEA also lifted its demand growth forecast by 100,000 barrels a day to 1.7 million barrels a day.
In a monthly market report, the IEA said global demand for gasoil
GAS00,
–a fuel generally used to power industrial machinery–had exceeded its expectations in almost all parts of the globe. European nations, facing frigid temperatures, an acute energy crisis and high natural gas prices, had seen a faster-than-expected switch to gasoil among manufacturers. Meanwhile, signs that China was set to reopen its economy sooner than expected raised the IEA’s expectations for the nation’s oil demand.
For 2022, the IEA now expects total oil demand of 99.9 million barrels a day, 100,000 barrels a day more than it was expecting last month. For 2023, the agency expects total demand at 101.6 million barrels a day, 300,000 barrels a day more than last month’s forecast.
The less developed economies not members of the Organisation for Economic Co-operation and Development account for most of that extra demand thanks in part to an improving picture for the Chinese economy as it begins to remove its Covid-19 pandemic restrictions, the IEA said.
Non-OECD demand would be 200,000 barrels a day stronger than forecast last month in both 2022 and 2023, the IEA. The agency sees total non-OECD demand of 53.8 million barrels a day this year and 55.2 million barrels a day in 2023.
For OECD nations, the IEA kept its demand forecasts for 2022 steady at 46.1 million barrels a day as increased gasoil demand was countered by a drop in naphtha demand. For 2023, the IEA raised its OECD demand forecasts by 100,000 to 46.5 million barrels a day.
The IEA also lifted its forecast for global oil supplies. It added to its 2022 and 2023 forecasts each by 100,000 barrels a day, takings its predictions to 100 million barrels a day and 100.8 million barrels a day, respectively.
Nonetheless, the IEA said oil supply declined in November for the first time in five months, as major gulf oil producers–members of the Organization of the Petroleum Exporting Countries–reduced their output in line with the oil producers groups’ plan to reduce output.
Write to Will Horner at william.horner@wsj.com
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Oil hasn’t yet climbed back to $100 per barrel, but options traders are increasingly setting their sights on another target—$200. The most actively traded
Brent crude
options contract on Thursday was an option to buy Brent at $200 in March 2023.
About half of the contracts to buy oil at that price appeared to be placed by one buyer who spent about $810,000 on the options, according to Robert Yawger, the director of energy futures at Mizuho Securities USA. But that buyer isn’t the only person making a bet that oil prices will hit $200, along with other bullish bets on where oil goes in 2023. “There have been people dipping their toes into those higher [options strike prices] over the last couple of days,” Yawger said.
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A key panel on Wednesday recommended that the Organization of the Petroleum Exporting Countries and its allies cut oil production by 2 million barrels a day, according to news reports. The recommendation by the Joint Ministerial Monitoring Committee comes ahead of a meeting of OPEC+ delegates in Vienna that’s slated to begin shortly. Expectations for a cut of around 2 million barrels a day have helped lift crude futures this week. West Texas Intermediate crude for November delivery
CL.1,
on the New York Mercantile Exchange rose 0.9% to $87.31 a barrel on the New York Mercantile Exchange, while December Brent crude
BRN00,
the global benchmark, was up 1% at $92.72 a barrel on ICE Futures Europe.
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