CAIRO: The Organization of the Petroleum Exporting Countries has further raised its forecast for Chinese oil demand growth in 2023 due to the relaxation of the country’s COVID-19 curbs, although it left the global total steady, citing potential downside risks for world growth.
World oil demand in 2023 will rise by 2.32 million barrels per day, or 2.3 percent, OPEC said in a monthly report. This was unchanged from last month’s forecast.
While faster Chinese demand could support the oil market, crude prices have fallen this week as the collapse of Silicon Valley Bank has sparked fears about a fresh financial crisis. OPEC flagged potential downside risks for the world economy from rising interest rates.
“China’s reopening, following the lifting of the strict zero-COVID-19 policy, will add considerable momentum to global economic growth,” OPEC said in the report.
“The rapid rises in interest rates and global debt levels could cause significant negative spill-over effects, and may negatively impact the global growth dynamic,” OPEC added.
OPEC expects Chinese oil demand to grow by 710,000 bpd in 2023, up from last month’s forecast of 590,000, although the global total was steady due to downward revisions elsewhere.
The report also showed OPEC’s crude oil production rose in February despite the wider OPEC+ alliance – which includes Russia – last year pledging output cuts to support the market.
OPEC said its crude oil output in February rose by 117,000 bpd to 28.92 million bpd.
Hassan Balfakeih, former chief oil demand analyst at OPEC Secretariat, described told Arab News the report is "a perspective on the global oil market that is cautiously optimistic and reflective of current market fundamentals".
He added: "The report has noted the favorable influence of China's economy fully reopening on oil consumption, but also underlining the relevance of a slowdown in economic activity in the United States and Europe, which could lower crude demand this year. As such, oil market parameters where kept unchanged as compared to last month’s report despite some changes within the regions.
"According to the report, the global economy continued to face obstacles such as high inflation and the conflict in Ukraine. While, the continued recovery of the travel and transportation sectors continues to drive global oil demand.”
- with input from Reuters