According to the chief executive of Saudi Aramco, Amin Nasser, global oil demand will continue to remain solid despite the recent voluntary reductions in production output by Saudi Arabia and Russia, as well as economic headwinds facing China, which is a major consumer of crude oil.
Nasser, speaking in a media call to reporters on Monday, predicted that the demand for oil in China would continue to grow.
He said, “There is still a lot of mileage for China and the economy (to pick) up,” adding that with the aviation sector only operating at 85% of the levels prior to the pandemic, there was still room for demand to grow.
His comments were made following the release of data showing that China, the second-largest economy in the world, failed to meet its growth estimates in the second quarter of the year. Projections estimated growth for the second quarter of the year would come in at over 7%, however the actual figure came in at 6.3%. Earlier, major investment banks, including Goldman Sachs, and JPMorgan, had announced they were cutting their full-year GDP forecasts for China.
Last week, Saudi Arabia announced it would be extending its voluntary cut of production output of 1 million barrels per day, for an additional month through September, and noted it reserved the right to extend it further or even deepen it.
On Monday, Nasser assured the media that, “We still have adequate supply to satisfy our customers.”
Oil prices have soared following announcements by Saudi Arabia and fellow OPEC+ member Russia that they were extending voluntary production cuts for an additional month in order to tighten the market and support prices. Russia also announced that in addition they would further cut exports by an additional 300,000 bpd, starting from September. That reduction would be on top of the previously announced 500,000 bpd production cut which had already reduced its output by almost 5%, which it began in March, and will be maintained through the end of the year.
All of these reductions in production output are in addition to an October agreement by OPEC+ to slash production output by roughly 2% of world demand, starting in last November, and extending through the end of 2023. The group later agreed to additional reductions as prices began to fall.
On Tuesday, European benchmark Brent crude was trading at roughly $85 per barrel, while West Texas Intermediate (WTI) was trading at about $81.
