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Oil Updates — Crude edges up; IEA says China’s COVID-19 reopening to push oil demand

RIYADH: Oil prices rose on Wednesday, extending the previous session’s gains, driven by optimism that the lifting of China’s strict COVID-19 curbs will lead to a recovery in fuel demand in the world’s top oil importer.

Brent crude futures firmed 76 cents, or 0.88 percent, to $86.68 a barrel by 10.00 a.m Saudi time, following a 1.7 percent rally in the previous session.

US West Texas Intermediate crude futures rose 87 cents, or 1.09 percent, to $81.05, having risen 0.4 percent on Tuesday.

China’s COVID-19 reopening set to push 2023 oil demand to new high: IEA

The lifting of COVID-19 restrictions in China is set to boost global oil demand this year to a new record high, the International Energy Agency said on Wednesday, while price cap sanctions on Russia could dent supply.

“Two wild cards dominate the 2023 oil market outlook: Russia and China,” the Paris-based energy watchdog said in its monthly oil report.

“Russian supply slows under the full impact of sanctions (while) China will drive nearly half this global demand growth even as the shape and speed of its reopening remain uncertain.”

Weak industrial activity and mild weather helped cut oil demand by nearly a million barrels per day in the OECD-developed countries in the last quarter of 2022.

But despite possible but likely mild recessions in Europe and the US, China’s expected reopening is set to fuel rebounds in nearby Asian economies and see it take the lead from India as the world’s leader in oil demand growth.

Guyana expects proposal from India for long-term crude purchases

Guyana expects to soon receive a proposal from India for long-term purchases of the South American country’s oil, President Irfaan Ali said on Tuesday, a new attempt to reach a government-to-government deal potentially leading to better sale terms for Guyana.

Guyana’s government is entitled to a share of crude produced off the nation’s coast by a consortium led by Exxon Mobil Corp. In 2022, Ali’s government received a total of 13 cargoes of crude, and it expects to receive and export 17 cargoes this year, the finance minister said earlier this week.

“India has made it very clear that they have an interest in being one of the purchasers of Guyana’s oil,” said Ali in a press conference at the State House residence in Georgetown. 

He added: “The technical teams will work and see what proposals India puts forward.”

Ali traveled to India earlier this month, where he met with India’s Petroleum Minister Hardeep Singh Puri and encouraged oil companies to participate in an incoming bidding round for crude and gas exploration blocks.

Venezuela’s PDVSA freezes most oil exports for contract reviews

The new head of Venezuela’s state oil company PDVSA has suspended most oil export contracts while his team reviews them in a move to avoid payment defaults, according to an internal document seen by Reuters and people familiar with the matter.

Since US trading sanctions were first imposed on PDVSA in 2019, the company has increasingly resorted to little-known middlemen to allocate its oil exports, leading to big price discounts and problems with payments affecting its cash flow.

The freeze order is leading to port delays, as vessels that were loading have been sent away and are waiting for new directions, the people said.

PDVSA’s new CEO Pedro Rafael Tellechea last week wrote to the heads of the company’s divisions of supply and trade, domestic market, international market, finances and foreign affairs and notified them of the contract suspensions. The letter did not specify how long the freeze would last.

The suspension so far has affected little-known firms that act as middlemen in PDVSA’s sales to Asian refiners. Cargoes chartered by US oil firm Chevron Corp. and Cuba’s Cubametales have not been affected by the contract revision, according to separate documents and the sources.

(With input from Reuters) 

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