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Growth in Chinese oil demand outweighs OECD weakness, says OPEC
Opec has raised its estimate for China’s oil demand growth in 2023, outpacing the Organisation for Economic Co-operation and Development’s (OECD) much weaker growth outlook.
According to Opec’s latest Monthly Oil Market Report (MOMR), the global oil demand growth forecast for 2023 is unchanged at 2.3 million barrels per day (mbpd), with China’s growth revised higher and the OECD Americas and Europe’s growth revised slightly lower. Gasoline and jet/kerosene are expected to see the fastest growth in demand.
OECD demand is expected to grow by 0.2 mbpd in the year to 46.23 mbpd, after a 0.35 mbpd forecast made in the previous MOMR. Non-OECD demand is expected to rise by 2.1 mbpd to 55.67 mbpd. China leads the way, jumping by 0.71 mbpd to 15.56 mbpd.
The rise was forecast at 0.59 mbpd in the previous MOMR, and the higher revision comes after a rebound of 0.8 mbpd in January — from 0.2 mbpd in December — as the country abandoned its zero-Covid strategy and transport, economic and social activities could return to normal.
According to OPEC, the fourth consecutive monthly annual decline in oil demand in OECD Europe occurred in December, which was weakened by macroeconomic effects and “geopolitical developments,” which are the conflict in Ukraine and the ensuing sanctions.
Due to Europe’s deteriorating economic situation, diesel demand has been low for seven months. OPEC now anticipates no growth in European oil demand this year, down from its earlier prediction of a modest 40,000 bpd growth.
US oil demand growth is also expected to be modest this year, at 90,000 bpd. Demand there fell by an unexpected 1.2 mbpd on the year in December, affected by bad weather.
Non-Opec liquids supply growth is forecast at 1.4 mbpd this year, to 67.2 mbpd, unchanged from last month’s MOMR, with growth led by the United States, Brazil, Norway, Canada, Kazakhstan, and Canada, and declines led primarily by sanctioned Russia. Opec expects Russian output to drop by 750,000 bpd this year to 10.3 mbpd, sharply lower than the 900,000 bpd drop forecast last month after higher than expected output in the first quarter this year.
The oil cartel said there are large uncertainties over non-Opec output growth because of the impact of “ongoing geopolitical developments”, and the potential for US shale. Opec puts the call on its members’ crude at 29.3 mbpd this year, up by around 800,000 bpd from 2022 and down by 100,000 bpd from last month’s update.