DTN Oil

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude traded on the Intercontinental Exchange settled Wednesday's session mixed after the Organization of the Petroleum Exporting Countries maintained global oil demand projections unchanged for 2024. Strong air travel demand and healthy road mobility in developing countries are expected to offset weaker industrial activity across OECD Europe and North America.

In its Monthly Oil Market Report, OPEC forecast worldwide oil consumption would grow at a robust 2 million barrels per day (bpd) during the first quarter, reflecting, in part, healthy construction and agricultural activities in non-OECD countries, which would boost demand for middle distillates. Total world oil demand is anticipated to reach a new record-high 104.4 million bpd in 2024.

For China, OPEC expects demand growth to average 16.78 million bpd this year, an increase of 630,000 bpd from the 2023 baseline.

"Looking ahead, China is expected to lead global oil demand in 2024. Healthy economic and services sector activity in 2023 is expected to continue into 2024, albeit with less momentum," said OPEC economists. "In addition, expected healthy manufacturing and driving activity is expected to strengthen diesel and gasoline demand."

Fresh macroeconomic data released overnight by China's National Bureau of Statistics paints a rather bleak picture for the world's second-largest economy, raising doubts about the optimistic outlook from OPEC economists. China's retail sales, a measure of domestic consumption, increased 7.4% on an annualized basis in December, missing market expectations for an 8% gain, showed the data from NBS. Meanwhile, industrial production -- a backbone of the Chinese economy -- increased just 0.52% at the end of 2023, a marked slowdown from the 0.87% pace seen in the prior month. Over the full year, China's industrial production increased by 6.8%.

A confluence of high interest rates across OECD countries and a growing decoupling between U.S. and Chinese businesses are among the factors behind sustained weakness in China's post-pandemic manufacturing activity. As a result, China's gross domestic product failed to reach its pre-pandemic potential last year, expanding at a 5.2% clip compared to an average of 7% during the 2015-2019 period.

Heading into 2023, many forecasters theorized that China's domestic consumption would see a strong rebound from the depressed levels of the COVID-19 pandemic, but the recovery never materialized. Given how wrong many were about 2023, it is worth asking if the same is possible about 2024.

Wednesday afternoon, oil traders also positioned ahead of the release of a U.S. inventory survey from the American Petroleum Institute, delayed by one day due to the Martin Luther King, Jr., holiday in the United States. The consensus of analysts and traders surveyed by the Wall Street Journal showed commercial crude stockpiles likely fell by 900,000 barrels (bbl) for the week ended Jan. 12, with estimates ranging from a drawdown of 3.5 million bbl to a build of 2.7 million bbl. That would follow a 1.3 million bbl crude build reported in the prior week. Gasoline inventories, which saw an 8-million-bbl build in the prior week, are estimated to have risen by 2.5 million bbl, according to the survey. Stocks of distillates are expected to increase by 600,000 bbl following an outsized 6.5-million-bbl build during the first week of January. Refinery capacity use likely fell by 0.6% to 92.3%.

The inventory data from the U.S. Energy Information Administration is scheduled for release at 11 a.m. EST Thursday.

At settlement, West Texas Intermediate for February delivery on NYMEX eked out a modest gain of $0.16 to $72.56 per bbl, and ICE March Brent dropped back to $77.88 per bbl, down $0.41. NYMEX February RBOB futures climbed $0.0135 to $2.1354 per gallon, and February ULSD futures eased $0.0070 to $2.6536 per gallon.

Liubov Georges can be reached at liubov.georges@dtn.com