A robust rebound in China’s oil demand this year may lead to the OPEC+ group reconsidering its production targets and quotas.
China’s reopening is putting upward pressure on global oil demand, and half of this year’s demand growth is set to come from the Chinese growth in consumption.
In case of a strong rebound in Chinese demand, OPEC+ may have to reconsider their output policy.
If demand goes up very strongly on the back of a strong Chinese economic rebound, then there will be a need for the OPEC+ countries to look at their output policies.
The million-dollar question is whether the OPEC+ group, which includes non-OPEC producer Russia, will respond to rising demand by lifting oil production targets. Alternatively, OPEC may prefer to see how the embargoes and price caps on Russian crude and oil products alter market flows and supply, and how interest rate hikes will impact economies in the short term.
Last year, while the world saw overall oil demand grow following the reopening of economies and gas trade flows materially shifted after the Russian invasion of Ukraine, China’s demand for both fossil fuels actually fell for the first time in decades.
The Chinese economy continued to grow last year, but at a much slower pace than in previous years.
This year, the reopening is expected to drive a rebound in oil demand, which could be pressured further upward by “exploding” jet fuel demand in China.
Global oil demand was set to rise by 1.9 million barrels per day (bpd) in 2023, to a record 101.7 million bpd, with nearly half the gain coming from China following the lifting of its Covid restrictions.
China will drive nearly half this global demand growth even as the shape and speed of its reopening remains uncertain.
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