Shafaq News/ The global oil market will likely tighten in the second half of 2023 after the recent decision by OPEC+ to cut oil production, Spencer Dale, BP plc's chief economist said on Tuesday.
There is a scope for oil markets to tighten a little bit in case China's oil demand and its overall economy recovers, Dale told reporters in a press conference.
Oil firmed slightly on Tuesday, recovering from a 2 percent slide in the previous session, as faster economic growth in top crude importer China supported the demand outlook and offset fears over US interest rates.
China's economy grew by a faster-than-expected 4.5 percent in the first quarter, with hopes of oil demand recovery buoyed further by a surge in oil refinery throughput to record levels in March.
Brent crude climbed 12 cents to $84.88 a barrel at 11.30 a.m. Saudi time and the US West Texas Intermediate rose 8 cents to $80.91.
Analysts at JPMorgan said oil prices are poised to rally soon as the Federal Reserve is expected to pause its rate hikes.
Since 1988, the final increase in a tightening cycle has been followed by increases in the price of Brent crude three months later, returning on average 9%, according to a recent note.
JPMorgan predicts Brent will rise to $94 a barrel in the fourth quarter, up 9.5% from current levels.
"The main takeaway for now: if the Fed pauses its rate-hiking campaign soon, the most likely scenario is that oil performs well," analysts said.
Markets expect the Fed to raise rates one more time in May, lifting them by another 25 basis points to a target range of 5%-5.25%, according to the CME FedWatch tool. But after that, no further hikes are seen.
To be sure, oil eventually turned negative after Fed pauses in 2000, 2006 and 2018 were followed by recessions, JPMorgan pointed out.
"However, if the US sees only a mild recession or lands softly, a new bull market may have already started forming," the note added.
JPMorgan predicts such a recession to show up at the end of 2023, or in 2024. And as inflation could stick around 4% this year, the Fed is unlikely to cut its rates.
But analysts expect demand for oil to stay resilient as the need for transportation fuel remains elevated and US commercial crude inventories are starting to shift downwards.
Others on Wall Street are less worry about a major recession as well, with BlackRock CEO Larry Fink crediting the large amount of federal stimulus as enough to rule out a hard landing.