CNA – Oil producers may have to reconsider their output policies following a demand recovery in China, the world’s second-largest oil consumer, the International Energy Agency’s (IEA) Executive Director Fatih Birol said on Sunday.
China, the world’s largest crude importer and number two buyer of liquefied natural gas, has become the biggest uncertain factor in global oil and gas markets in 2023 as investors bet on the speed of its recovery after Beijing lifted COVID-19 restrictions in December. “We expect about half of the growth in global oil demand this year will come from China,” Birol told media on the sidelines of the India Energy Week conference.
He added that China’s jet fuel demand is exploding, putting upward pressure on demand.
“If demand goes up very strongly, if the Chinese economy rebounds, then there will be a need, in my view, for the OPEC+ countries to look at their (output) policies,” Birol said.
Producer group OPEC+ angered the United States (US) and other Western nations in October when it decided to cut output by two million barrels a day from November through 2023, instead of pumping more to cut fuel prices and help the global economy as the US advised.
Birol said he hoped such a situation does not repeat, and that OPEC+ will return to a constructive role in the market as demand improves.
OPEC+ rolled over the group’s current output policy at a meeting last Wednesday, leaving production cuts agreed last year in place.
Separately, Birol said price caps on Russian oil likely cut Moscow’s revenues from oil and gas exports by nearly 30 per cent in January, or about USD8 billion, compared to a year before.
G7 nations, the European Commission and Australia this week approved a USD100 per barrel price cap on diesel and a USD45 per barrel cap on discounted products such as fuel oil starting from February 5.
Birol said fuel markets might face difficulties in the short term as global trade routes “reshuffle” to accommodate Europe drawing on more imports from China, India, the Middle East and the US.
That could force other markets such as Latin America to scout for alternative imports, he said.