Oil prices up amid forecasts of 2023 demand uptick

Oil prices rose on Wednesday after OPEC and the International Energy Agency (IEA) both forecast a rebound in demand over the course of next year and as U.S. rate hikes are expected to ease alongside slowing inflation.

Brent crude futures rose $1.31, or 1.6%, to $81.99 per barrel by 1421 GMT, while U.S. West Texas Intermediate (WTI) crude futures were up $1.41 at $76.80. Both contracts fell around 11% last week.

The Brent contract has returned to a backwardated market structure whereby front-month loading barrels trade higher than later deliveries, which indicates worries about oversupply are subsiding.

The structure had dipped into contango last week, with front-month deliveries cheaper than later-loading ones.

Looking into 2023, OPEC said it expects oil demand to grow by 2.25 million barrels per day (bpd) over next year to 101.8 million bpd, with potential upside from China, the world’s top importer.

The IEA, seeing Chinese oil demand recovering next year after a 400,000 bpd contraction in 2022, raised its 2023 oil demand growth estimate to 1.7 million bpd for a total of 101.6 million bpd.

Road and air traffic in China has rebounded sharply, data suggests.

“The setup remains supportive of triple digit prices…The recent volatility presents a good entry point ahead. Balances may be looser for the next quarter but by 2Q a new price rally will be upon us,” said Bernstein analyst Oswald Clint.

The U.S. consumer price index rose 0.1% in November after a 0.4% rise the previous month, fuelling hopes for a slowdown in interest rate hikes, which in turn could support oil prices.

U.S. Federal Reserve policymakers are expected to raise rates by 50 basis points later on Wednesday, slowing from the 75-basis-point pace they had stuck to since June.

Oil prices have been supported by a leak and outage of TC Energy Corp’s Keystone Pipeline, which ships 620,000 barrels per day of Canadian crude to the United States.

Officials said the cleanup will take at least several weeks.

Sending bearish signals, U.S. crude inventories rose 7.8 million barrels in the week to Dec. 9, according to sources citing data from the American Petroleum Institute, while analysts polled by Reuters expected a 3.6 million barrel drop. [API/S]

U.S. crude stockpile data is due from the Energy Information Administration (EIA), the statistical arm of the Department of Energy, at 1530 GMT. [EIA/S]