Opec maintains 2023 oil demand forecast despite slowdown concerns in Europe and US

China’s reopening will add 'considerable' momentum to global economic growth, group says

Opec's headquarters in Vienna. The oil producers group said the world economy continues to face challenges ranging from elevated inflation to the Ukraine war. AP
Powered by automated translation

Opec stuck to its 2023 growth forecast for oil demand despite expectations of lower crude demand from Europe and North America amid concerns about an economic slowdown, as China's reopening balanced the market.

Crude demand growth has been adjusted lower in the current quarter and the next to account for an “expected slowdown” in economic activity in the Americas and Europe, the group said in its monthly oil market report on Tuesday.

Opec, which expects crude demand to grow by 2.3 million barrels per day this year, has estimated a 700,000-bpd rise in China’s crude consumption in 2023.

The oil producers' group said the world economy continued to face challenges ranging from elevated inflation to the Ukraine war.

“Overall, oil demand continues to be driven by the ongoing recovery in the travel and transportation sectors,” it said.

“China’s reopening … will add considerable momentum to global economic growth.”

China, the world’s second-largest economy and top crude importer, reopened its borders in January after adhering to a strict zero-Covid policy for about three years.

The country is aiming for gross domestic product growth of 5 per cent in 2023, after it grew by 3 per cent in 2022.

Last week, Opec secretary general Haitham Al Ghais was “cautiously optimistic” about China's reopening but said that a slowdown in the US and the EU could dampen crude demand this year.

“There is phenomenal demand growth in Asia [but] what concerns us more is actually the slowdown we see in Europe and the US in terms of the financial situation [and] the inflation,” Mr Al Ghais said at the CeraWeek energy conference in Houston.

“We see a kind of a divided market … one market with promising growth [and] the other side with a slowdown.”

At its last meeting, the Opec+ alliance of 23 oil-producing countries agreed to extend its existing oil output cuts of 2 million bpd.

In January, the International Monetary Fund raised its global economic growth estimate for this year to 2.9 per cent, from a previous forecast of 2.7 per cent.

Global economic growth may be reaching a “turning point”, supported by falling inflation and China’s reopening, International Monetary Fund managing director Kristalina Georgieva said last month.

“While this is encouraging, the balance of risks remains tilted to the downside. China’s recovery could stall [and] inflation could remain higher than expected,” she said.

The International Energy Agency expects global oil demand to rise by 2 million bpd to 101.9 million bpd this year.

Jet fuel demand will increase by 1.1 million bpd to 7.2 million bpd, or about 90 per cent of 2019 levels, according to the agency's estimates.

Brent, the benchmark for two thirds of the world’s oil, was trading 1.67 per cent lower at $79.42 a barrel at 3.29pm on Tuesday as the collapse of a major US bank led to a sell-off in financial markets.

West Texas Intermediate, the gauge that tracks US crude, was down 2.05 per cent at $73.27 a barrel.

Updated: March 14, 2023, 12:21 PM