There are signs a stronger China rebound will boost oil: IEA

Chinese flag Source: iStock

China’s economy could be poised for a stronger-than-anticipated rebound that’ll deliver a demand boost for oil and natural gas, according to the head of the International Energy Agency.

There are some “first indications” from China that growth will accelerate faster than previous expectations and the nation is projected to deliver around half of a forecast increase in global oil demand of almost 2 million barrels a day this year, IEA Executive Director Fatih Birol said in an interview.

“This may be even stronger if the Chinese economy advances stronger than we assume,” Birol said in Bengaluru, ahead of a three-day energy forum opening Monday. “Global oil and LNG demand will go upwards.”

Jet fuel consumption in China is already “very, very strong,” and that’s likely to increase overall oil demand if it continues to grow at the same pace, he said.

Oil slumped to a third straight monthly loss in January amid concerns about rising US stockpiles and uncertainty over demand. There’s also been some caution over the pace of China’s recovery, with data showing weakness persisting among manufacturers and in sales of cars and homes.

The Organization of Petroleum Exporting Countries and its allies will remain “exceedingly cautious” about adding barrels to the oil market until there’s evidence of elevated demand, RBC Capital Markets LLC said in a note last week. 

A fresh price cap on Russian fuel exports, including diesel, imposed Sunday by Group of Seven nations and the European Union could create some initial supply difficulties as trade flows adjust, according to Birol. India will have the opportunity to raise diesel exports in the coming months as a result, he said.

© 2023 Bloomberg L.P.

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