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Global oil demand could soar as much as 4% in the coming year if the world manages to fully emerge from Covid restrictions, hedge fund trader Pierre Andurand has told Bloomberg. Andurand says in a tweet that oil demand may increase by 3 million to 4 million barrels a day in 2023 helped by a switch to oil from gas.
Crude prices rose a few weeks ago after China unveiled the most sweeping changes to its strict Covid-19 guidelines, including relaxing testing requirements and travel restrictions. Further, people infected with Covid-19 but have only mild or no symptoms are now allowed to isolate at home instead of convalescing in centrally managed facilities.
Unfortunately, a massive new Covid wave in the country has caused jitters in the markets and forced oil prices to reverse course.
According to health data firm Airfinity, more than 5,000 people are probably dying each day from COVID-19 in China, with the firm’s mortality risk analysis suggesting that 1.3 to 2.1 million people could die in the country’s current COVID outbreak.
On the flip side, Andurand says oil demand will likely be limited by the rapid growth of the EV sector with the analyst saying electric vehicles could be displacing as much as 600,000 barrels of oil per day.
Eric Nuttall, partner and senior portfolio manager at Ninepoint Partners LP, has told the Financial Post that oil prices will return to $100 per barrel in 2023. According to the analysts, many of the headwinds that have cut short the oil price rally this year, including China’s zero-Covid policy and the coordinated SPR releases by several governments, will no longer be there in 2023. Coupled with sanctions on Russia’s oil and gas, this should elevate oil prices. He has also predicted that the energy sector will continue to outperform other market sectors due to high demand in oil and gas stocks.
Last week, the Bank of America predicted that Brent could quickly go past $90 per barrel on the back of a dovish pivot in the U.S. Federal Reserve and a “successful” economic reopening by China.
By Alex Kimani for Oilprice.com
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Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com.