Opec+ sticks to output targets amid improving China outlook

The Opec+ alliance of 23 oil-producing countries has agreed to roll over its existing oil output cuts as the fuel demand outlook in China – the world’s second-largest economy and top crude importer – improves.

“The JMMC [Joint Ministerial Monitoring Committee] reaffirmed their commitment to the DOC [declaration of co-operation] which extends to the end of 2023,” said the group, which cut its collective output by 2 million barrels per day in October last year. The committee reviewed the crude oil production data for November and December and urged all participating countries to achieve “full conformity”.

The next meeting of the JMMC is scheduled for April 3.

The announcement comes as oil prices have rallied by nearly 13 per cent from a low of $76 last month, after China lifted Covid-19 restrictions and hopes grew that easing inflation would slow the rate of interest rate increases by central banks.

Brent, the benchmark for two thirds of the world’s oil, was down 0.32 per cent at $85.19 a barrel at 6.09pm UAE time.

The International Monetary Fund on Tuesday raised its global economic growth forecast for this year by 0.2 percentage points to 2.9 per cent, but said that more needed to be done for a full recovery.

The fund said a depreciating US dollar, coupled with global monetary policy tightening, was starting to cool demand and inflation.

Meanwhile, global oil demand is set to reach record levels this year, supported by fuel demand recovery in China. The International Energy Agency has said the Asian country will account for nearly half of its 2023 oil demand growth forecast of 1.9 million bpd.

Research firm Energy Intelligence expects demand to grow to 101.2 million bpd this year, surpassing a previous record of 100.6 million bpd in 2019.

Although China represents 10 per cent to 15 per cent of global oil and gas demand, the country’s recovery has not been entirely priced in by global commodity markets, according to Japanese bank MUFG. The existing commodity prices do not tally up with China’s economic growth and “rapidly normalising” mobility in the country, said Ehsan Khoman, head of research – commodities, ESG and emerging markets at MUFG.