China’s demand comeback to help oil weather banking crisis

March 31 (Reuters) – Oil will rebound after recent banking turmoil as demand from top consumer China is set to soar but worries around economic growth will keep both benchmarks hovering below USD 90 this year, a Reuters poll showed on Friday.

A survey of 45 economists and analysts forecast benchmark Brent crude would average USD 86.49 a barrel this year, down from February’s estimate of USD 89.23.

Brent is currently trading around USD 80, having been dragged to 15-month lows near USD 70 earlier this month on mounting worries over the stability of the banking sector. Those fears have since largely been allayed by institutional rescue measures for struggling banks.

“Fundamentals for the oil market do not seem to have changed meaningfully in light of bank runs in the US and the forced takeover of a Swiss bank,” said Suvro Sarkar, energy sector team lead at DBS Bank.

“The dip in oil prices is more of a blip at the moment, rather than a sustained move below USD 80 per barrel”.

Analysts forecast US crude to average USD 80.88 a barrel in 2023, down from the USD 83.94 consensus last month, but still above current trades of around USD 74.

Most analysts polled by Reuters expect oil prices to stay below USD 90 on fears of a recession in developed economies stemming from interest rate increases to bring down inflation.

Global oil demand is seen rising by about 1 million-2 million barrels per day (bpd) in 2023, with dips related to economic jitters or slowdowns in the West likely to be countered by increases from China, the world’s biggest oil importer.

“Oil demand in China should pick up a bit further over the year. And while US demand should slow, it won’t fall, even as the economy weakens under the weight of higher interest rates,” Capital Economics’ Bill Weatherburn said.

Along with China, prices will also hinge on potentially declining Russian oil production due to Western sanctions, with a combination of the two likely tightening global supplies, analysts said.

OPEC+, which comprises the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, is likely to stick to its deal on output cuts of 2 million bpd until the end of the year, which could add to upward price momentum, the poll showed.

(Reporting by Bharat Govind Gautam in Bengaluru; Additional reporting by Deep Vakil and Swati Verma; Editing by Noah Browning and Jan Harvey)