China, U.S. spearhead global efforts to replenish low oil stocks

Analysts and traders anticipate that a push to replenish depleted oil stocks in China, the United States, and Europe could boost demand and prices in the coming months, especially as tensions in the Middle East threaten key shipping lanes, Reuters reported on Wednesday.

Global oil inventories have been heavily depleted due to supply disruptions from sanctions on Russia and protracted OPEC+ output cuts. The recent shipping disruption in the Red Sea has raised concerns about supply, prompting buyers to rebuild inventories.

Morgan Stanley has raised its quarterly outlook for Brent crude prices to an average of $82.50 a barrel in the first and second quarters, indicating a tight oil market this year.

Consultants FGE reported a large counter-seasonal fall in crude and fuel stocks, while the International Energy Agency (IEA) noted a decrease in global inventories to the lowest level since July 2022.

Chinese, U.S., and European buying of oil is on the rise as they restock and replenish their inventories. The United States is gradually topping up its Strategic Petroleum Reserve after selling a record amount from the government oil stores in 2022.

OPEC+ has been implementing output cuts to buoy prices, and Saudi Arabia recently halted plans to boost its maximum production capacity, citing the need to aid the energy transition.

Despite this, analysts predict a long-term imbalance in OPEC supply and anticipate a price rise of $10 by May, assuming no geopolitical shocks and a reintroduction of combined 400,000 barrels per day back into the market starting in April.