Citing new data from the International Energy Agency (IEA), Reuters is reporting that if demand in China recovers, global oil producers may need to revise their output policies to accommodate the surge in demand.
The warning was issued following a meeting last week of OPEC+, the alliance of major oil producers led by Saudi Arabia and Russia, where it was decided to maintain current production output quotas.
Fatih Birol, executive director of the IEA, said on Sunday, “We expect about half of the growth in global oil demand this year will come from China.” He pointed out China’s consumption of jet fuel was exploding, which was already putting upward pressure on demand.
He added, “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.”
In October, despite US pressure to increase production output quotas, OPEC+ member states elected to reduce output by 2 million barrels per day between November and the end of the year. It was the biggest cut in output since 2020 during the onset of the pandemic.
OPEC+ has resisted engaging in further output cuts due to Western sanctions on Moscow. The cartel fears Russia could slash its production on its own, as a retaliatory measure in response to the sanctions and subsequent price-cap programs on crude oil and refined petroleum products that Western powers have attempted to impose on the Kremlin’s sales.
OPEC’s decision was also influenced by the uncertainty surrounding China’s reopening and the return of its normal demand. Although China has finally abandoned its strict zero-Covid policies, experts note the nation is still struggling with the consequences of a Covid-19 pandemic which occurred as it loosened its pandemic policies.
At a meeting of the Joint Ministerial Monitoring Committee of OPEC+ last week, which monitors the alliances’ production output and its compliance with output quotas, it was recommended that the production cuts implemented last year be left in effect.
