Oil Has Increased by More than 2%

On Wednesday, oil prices increased by more than 2% due to tighter supply, a falling dollar, and hope for a recovery in Chinese demand.

The gains were, however, constrained by the likelihood that OPEC+ will maintain output at its upcoming meeting.

Brent crude futures were up $2.06, or 2.48%, to $85.09 per barrel. In the more active contract, Brent crude increased by 2.02% to $85.95.

In the week ending November 25, U.S. crude oil stocks decreased by 7.9 million barrels.

Additionally, the International Energy Agency anticipates a 2 million barrel per day reduction in Russian crude production by the end of the first quarter of 2019.

On the demand side, hope for a recovery in demand in China, the biggest consumer of crude, provided additional support.

China reported fewer COVID-19 infections than on Tuesday. Moreover, according to the market, travel restrictions might be relaxed due to the weekend demonstrations.

Oil below $100 in 2023

According to a Reuters poll released on Wednesday, Brent oil prices will remain above $100 for the remainder of 2022 as supply becomes uncertain due to an impending EU ban on Russian oil. Still, they will slightly decline in 2019 due to persistent economic worries.

In a poll of 38 economists and analysts, benchmark Brent crude prices were predicted to average $100.50 this year and $95.56 in 2023. It is slightly less than the consensus estimates of $101.10 and $95.74 from October. Concerns over demand from top consumer China as it struggles with COVID lockdowns and protests caused Brent to trade around $84 per barrel on Wednesday, down over 15% since early November.

According to Frank Schallenberger, head of commodity research at LBBW, the oil market faces three key issues.

On December 5, the EU’s ban on Russian oil will go into effect along with a G7 plan to impose a low price on Russian oil sales.

Analysts disagreed on the likely effects of the overall plan, which EU leaders are still debating, and predicted a supply shortfall of anywhere between 500,000 and 2 million barrels per day (BPD).

Demand growth, driven by Asia, should reach 1.8–2.1 million BPD in 2022 and 1-2 million BPD the following year.

Although prices will drop in 2023 due to a slowing economy, “we don’t expect oil prices to plunge off a cliff given the limited supply and proactive production cuts by OPEC+.”

Eastbound Gas Flows Fell

Eastern gas flow on the Yamal-Europe pipeline from Germany to Poland fell on Wednesday morning. Meanwhile, the flow from Russia through Ukraine to Europe remained stable.

Exit flows at the Mallnow metering point on the German border were 997,118 kWh/h between 0700 and 0800 CET, up from around 6,500,000 kWh/h.

The volume of Russian gas entering Slovakia from Ukraine through the Velke Kapusani border increased to 38.6 million cubic meters from 37.6 million cubic meters the previous day, according to the nomination or request of the Ukrainian transport system. Russia’s Gazprom said it would send 42.4 million cubic meters of natural gas to Europe via Ukraine on Wednesday.

Gas flows through the Nord Stream 1 pipeline, which connects Russia and Germany across the Baltic Sea, remained at zero. Russia stated that it could not restart the pipeline but suspected sabotage has since damaged it.