Opec sticks to 2023 oil demand forecast despite headwinds in Europe and US

Opec has stuck to its growth projection for oil demand this year despite lowering its forecast in North America and Europe amid a slowing economy.

The oil producers’ group said improved crude demand in Organisation for Economic Co-operation and Development (OECD) countries led by China, was balancing out the market.

Crude demand growth has been adjusted lower for “all four quarters of 2023, to reflect the most recently received data for the first quarter of 2023 and account for an anticipated decline in economic activity in OECD Americas and OECD Europe”, Opec said in its monthly market report on Thursday.

“On the other hand, oil demand in the non-OECD countries was revised higher due to a better-than-expected improvement in economic activity in China after its zero-Covid policy was discontinued, as well as expected further improvements in the Middle East, Latin America and other [parts of] Europe.”

Opec expects crude demand to grow by 2.3 million barrels per day this year to 101.89 million bpd. However, that assessment is “subject to many uncertainties”, including the “trend and pace of economic activity” in OECD and nonOECD countries, Opec said.

It expects oil demand in the non-OECD region to grow by 2.2 million bpd this year. In OECD countries, demand is projected to increase marginally to above 100,000 bpd on an annual basis. In China, oil demand rebounded by 900,000 bpd annually in February, up from 800,000 bpd in January.

“These improvements in oil demand came on the back of an ongoing recovery in economic and social activity, combined with firm petrochemical sector requirements, with all oil product categories showing healthy demand in February,” Opec said.

China, the top crude importer, reopened its borders in January after adhering to a strict zero-Covid policy for about three years. It is aiming for gross domestic product growth of 5 per cent this year, after growing by 3 per cent last year.

Last month, Opec secretary general Haitham Al Ghais was cautiously optimistic about China’s reopening but said a slowdown in the US and the EU could hit 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] inflation,” Mr Al Ghais said at the CeraWeek energy conference in Houston at the time.

This month, Goldman Sachs said China’s reopening and the recovery of its domestic demand would be a boon to the global economy, boosting world GDP by about 1 per cent this year and driving a rally in oil prices.

Brent, the benchmark for two thirds of the world’s oil, was down 0.97 per cent at $86.48 a barrel at 8.34pm UAE time on Thursday. West Texas Intermediate, the gauge that tracks US crude, was down 0.92 per cent at $82.49 a barrel.

China’s oil imports in March surged 22.5 per cent from a year earlier to their highest level in a single month since June 2020 as refiners stepped up runs in anticipation of an economic recovery, Reuters reported on Thursday, citing data from a Chinese agency.

Crude imports stood at 12.3 million bpd last month, compared with 10.1 million bpd a year ago, signalling that China’s economic activity is picking up after the coronavirus-induced slowdown. This month, the Opec+ alliance of 23 oil producers agreed to stick to oil output cuts after nine of its members moved to voluntarily to collectively reduce production by more than a million bpd.