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OPEC Sees Weaker Western Oil Demand Countering Growing Chinese Appetite – WSJ

  • Vienna-based oil cartel leaves forecasts for economic growth unchanged
OPEC expects oil demand in Western nations and in Asia to head in different directions.
OPEC expects oil demand in Western nations and in Asia to head in different directions.(Lisa Leutner/Reuters)

Will Horner, WSJ

EnergiesNet.com 03 15 2023

OPEC left its forecasts for global oil-demand growth this year steady as growing optimism about Chinese demand for crude was countered by concerns about the economic picture in the U.S. and Europe.

In its monthly market report, the oil producers’ group said it expected oil demand to grow by 2.3 million barrels a day this year to 101.90 million barrels a day, largely on par with its previous estimates.

Despite that, OPEC expects oil demand in Western nations and in Asia—particularly China—to head in different directions, and adjusted some forecasts to account for that. It lowered its demand forecasts for the wealthier countries that make up the Organization for Economic Cooperation and Development, while raising its demand forecast for non-OECD countries, which include China and India.

OPEC said it expects non-OECD demand of 55.67 million barrels a day this year, 270,000 barrels a day more than its earlier forecasts. OPEC cuts its forecasts for OECD oil demand this year by 240,000 barrels a day to 46.23 million barrels a day.

China’s move to reopen its economy has driven expectations that demand for oil from the Asian nation and its neighbors will surge this year, particularly as international travel to and from China begins to return to prepandemic levels.

That had led many oil analysts to foresee higher oil prices, as global oil supplies—still constrained by sanctions on Russia—struggle to keep pace with the additional demand. But weakness in the U.S. and European economies, beset by rising interest rates and still-high inflation, is weighing on oil demand there and compensating for the additional demand in Asia, OPEC said.

The Vienna-based oil cartel also left its forecasts for economic growth unchanged. OPEC expects global growth of 2.6% this year, with China’s economy growing 5.2% while the eurozone and the U.S. economies growing 0.8% and 1.2%, respectively.

After tumbling from the highs they hit following Russia’s invasion of Ukraine, oil prices have remained largely unchanged for most of this year. Brent crude, the international oil benchmark, has hovered at around $80 a barrel, though prices have been highly volatile.

In recent days, worries about the impact of interest rates on the U.S. banking sector—sparked by Silicon Valley Bank’s collapse—have spilled over into the oil market, sending prices lower. On Tuesday, Brent crude oil fell 1.6% to $79.47 a barrel.

Write to Will Horner at william.horner@wsj.com

Appeared on the WSJ in the March 15, 2023, print edition as ‘China Demand Keeps OPEC on Target’.

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