MIDDLE EAST Energy Review

By Tsvetana Paraskova

The OPEC+ group, led by the major oil producers in the Middle East and Russia, left in early February their output targets unchanged and signalled they would not hurry to change the policy even after Russia announced a cut in its oil production for March.

OPEC, meanwhile, raised slightly its global oil demand forecast, on the back of expectations that a Chinese rebound after the reopening will drive half of this year’s consumption growth worldwide.

OPEC+ Not Changing Production Policy For Now

The OPEC+ alliance agreed at the beginning of February that the target production – decided last year and effective by December 2023 – will be reaffirmed for the next few months.

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The Joint Ministerial Monitoring Committee (JMMC) of the group, which recommends policy actions to the OPEC+ ministerial meetings, reaffirmed the commitment to the agreement from October 2022, which reduced the alliance’s collective production target by 2 million barrels per day (bpd).

OPEC+ does not plan to change its policy, delegates from the group told Reuters later in February, after Russian Deputy Prime Minister Alexander Novak said that Russia, a member of OPEC+, would cut its oil production by 500,000 bpd in March, as a result of the Western sanctions and the price cap on Russian crude oil. According to the Kremlin, Russia discussed its plan to reduce production with some members of OPEC+, but Moscow had not formally consulted with the group before announcing the decision, a Russian government source told Reuters.

OPEC Sees Higher Oil Demand As China Reopens

OPEC raised by 100,000 bpd its world oil demand forecast for 2023 in its February Monthly Oil Market Report (MOMR). Oil demand growth is now expected at 2.3 million bpd, compared to 2.2 million bpd projected in the January report. Minor upward adjustments were made to OECD Asia Pacific

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www.craig-international.com in the first and second quarter of 2023, to “reflect the expected positive spillover from the opening of the Chinese economy on the region’s petrochemical sector.”

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During the first quarter this year, global oil demand is expected to rise by 1.9 million bpd year over year, and to grow even more in the following quarters. Overall oil demand in 2023 is set to average 101.9 million bpd, OPEC said in its report.

The cartel cautioned “However, this forecast is subject to many uncertainties, including global economic activity, a possible shift in China’s COVID-19 policy, and ongoing geopolitical developments.”

Most of the growth in demand this year will come from the non-OECD countries, where oil demand is forecast to grow by around 2.0 million bpd year over year, surpassing prepandemic levels for the second consecutive year. China, Other Asia, and the Middle East are expected to drive oil demand growth, OPEC said. Global consumption of transportation fuels will be the key growth driver, with petrol and diesel demand set to jump well above prepandemic levels and supported by expected continued growth in mobility amid an ongoing rebound in the services sector. Jet fuel demand will also continue to rebound, although air travel would still be around 9 per cent below pre-Covid levels.