OPEC on Tuesday 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 (bpd), or 2.3%, the Organization of the Petroleum Exporting Countries 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 bpd and a contraction in 2022. Last month’s report had also raised the Chinese forecast.
The global total was steady due to downward revisions elsewhere, including the United States and Europe.
OPEC was cautious on economic prospects, leaving its 2023 global growth forecast at 2.6%. The report cited the U.S. Federal Reserve successfully managing an inflation slowdown as among potential upside factors.
Oil weakened after the report was released, extending an earlier decline. Brent crude was down over $1 to below $80 a barrel.
HIGHER OUTPUT
The report also showed OPEC’s oil production rose in February despite output cuts by the wider OPEC+ group. OPEC+ includes the 13 OPEC members, plus Russia and other outside producers.
For November last year, with prices weakening, OPEC+ agreed to a 2 million bpd reduction in its output target – the largest since the early days of the pandemic in 2020. OPEC’s share of the cut is 1.27 million bpd.
OPEC said its crude oil output in February rose by 117,000 bpd to 28.92 million bpd, helped by a further recovery in Nigeria which has boosted supply due to improved security in its oil-producing Delta region.
Despite the rise, OPEC is still pumping much less than called for by the OPEC+ agreement, as Nigeria, Angola and other members struggle to reach their targets.
The report also trimmed its estimate of the amount of crude OPEC needs to pump in 2023 to balance the market by 200,000 bpd to 29.3 million bpd, suggesting a less tight market outlook than previously thought.
