Drag on Oil Demand in China and US Is Limiting Rally, Citigroup’s Morse Says

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ODESSA, TEXAS - MARCH 13: An oil pumpjack works in the Permian Basin oil field on March 13, 2022 in Odessa, Texas. United States President Joe Biden imposed a ban on Russian oil, the world’s third-largest oil producer, which may mean that oil producers in the Permian Basin will need to pump more oil to meet demand. The Permian Basin is the largest petroleum-producing basin in the United States. (Photo by Joe Raedle/Getty Images)

The drag on oil demand in China, Europe and the US is weighing heavily on crude prices, capping the potential gains from OPEC+ supply cuts, Citigroup Inc. analyst Ed Morse says.

China is cutting back purchases of expensive crude and exporting more high-value refined products as the country grows to be almost as important to oil markets as OPEC+, Morse said in an interview on Bloomberg Television. The nation’s pullback will counter crude’s recent rally and help shift the oil market to a surplus next year, with Brent collapsing to the low $70s a barrel, Morse wrote in a note earlier today.

China’s current oil inventories could satisfy about 130 days of its demand, outstripping the global standard of around 90 days, he said.

“They’ve really overdone it,” said Morse, Citi’s global head of commodities research. 

Ed Morse, global head of commodities research at Citigroup, explains his bearish call for Brent crude in 2024 on “BloombergMarkets: The Close.”

Oil production growth from Iran, Iraq, Libya, Nigeria and Venezuela will continue at the rate of around 1 million barrels a day, Morse said, a source of new supplies that has been underestimated by the Organization of Petroleum Exporting Countries and the International Energy Agency alike. 

Oil fell below $90 a barrel on Monday on worries that further interest rate hikes could slow the US economy.

©2023 Bloomberg L.P.

By Chunzi Xu, Romaine Bostick , Katie Greifeld


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