US crude slumps over 4% despite OPEC's outlook on Chinese demand

Oil prices fell on Tuesday sharply despite OPEC's positive outlook for Chinese demand this year. 

OPEC's outlook

In its monthly report, OPEC raised its forecasts for growth in Chinese oil demand once more in 2023 after easing Covid 19 restrictions, while still maintaining its global growth forecasts unchanged. 

OPEC expected global demand on crude to rise by 2.32 million bpd, or 2.3% in 2023. 

The growth in Chinese demand was expected to bolster the oil market after a slump in prices following the collapse of the US SVB bank, triggering concerns about a wider economic impact. 

OPEC warned the brisk pace of rate hikes worldwide and rising global debt could weigh heavily on growth and demand. 

OPEC expects Chinese demand to rise by 710 thousand bpd in 2023, up from previous forecasts of 590 thousand bpd. 

OPEC also reported an increase of 117 thousand bpd in its crude output to 28.92 million bpd. 

US Economy 

The fallout of the US bank's collapse continue to reverberate in the US and global markets, causing disruptions.

Investors are worried the crisis might cause a US recession, especially as the Federal Reserve continues to tightening policies aggressively.

US President Joe Biden attempted to reassure the markets, calling for confidence in the banking system following the Silicon Valley Bank collapse, the second largest banking collapse since 2008.

Biden asserted consumers deposits are always protected, calling for small companies nationwide to deposit cash into banks to support liquidity. ‏

Credit rating agency, Moody's, revised its outlook rating for the US banking sector to negative due to worsening operating environment following the recent collapses.

On trading, US crude futures due in April fell 4.1% as of 18:15 GMT to $71.7 a barrel. 

Brent futures due in May fell 3.7% to $77.7 a barrel.