Crude Can Recover Soon on Positive OPEC Report and Forecast Despite SVB-Induced Wall Street Chaos

Brent crude prices fell back below $80 on Tuesday initially as markets remained volatile following the Silicon Valley bank’s collapse.

Benchmark Brent crude fell to $79.00 in choppy trade on Tuesday morning, but thereafter recovered to $80/bbl – still down more than 0.6% on the day. Oil prices started Monday with a sharp drop, down $2 a barrel, on fears of a spate of bank failures amid the SVB shutdown, helping highlight the economic breaches that could be created by continued rate hikes. If it weren't for the positive Chinese demand data, the oil industry's price fate would have been more apparent. OPEC has raised its forecast for Chinese demand growth to 710,000 bpd (more below).

OPEC left its forecasts for global oil demand growth this year unchanged, as growing optimism about Chinese and Indian appetite for crude was countered by concerns about the economic picture in the U.S. and Europe. According to a monthly report, the Organization of the Petroleum Exporting Countries produced about 28.92 million barrels per day of crude oil, about 300,000 barrels more than its second-quarter forecast. Global oil consumption typically slows around this time, the slower period between the end of winter and the start of the summer driving season. On the supply side, growth in non-OPEC liquids production in 2023 is expected to be unchanged from last month, with an expected increase of 1.4 million barrels per day.

According to OPEC, the global oil market is expected to post a modest surplus in the next quarter due to a seasonal slowdown in demand. Also in its monthly market report, the oil cartel said it expected oil demand to grow by 2.3 million barrels a day this year to 101.90 million barrels a day, largely on par with its previous estimates.