The OPEC+ decision to extend 3.7 million b/d cuts into 2024 will likely lead to higher prices, but the world also needs to weigh Chinese demand, which was the main uncertainty for markets right now, the executive director of the International Energy Agency said June 5.
Receive daily email alerts, subscriber notes & personalize your experience.Register Now
The 23-member OPEC+ alliance, currently trimming its output by 2 million b/d, extended the deal until the end of 2024 following a June 4 meeting.
Saudi Arabia also will cut its crude output by an extra 1 million b/d for at least July on top of its existing production cuts.
Other members, including Saudi Arabia, who had pledged voluntary additional cuts totaling some 1.7 million b/d starting May, will maintain these cuts through the end of 2024.
With oil prices were expected to increase as demand and supply balance tightens in the second half of 2023, "this decision will be another factor which could further push the prices up," Fatih Birol told the annual general assembly of the International Air Transport Association taking place in Istanbul.
However, Birol cautioned that China remains "the main uncertainty for the global market."
The IEA expects global oil demand to grow by 2.2 million b/d year on year in 2023, with about 60% of growth coming from China, it said in its May monthly oil market report.
China's road and air mobility recovery in March pushed up its oil demand by 450,000 b/d month on month to a new record of 16 million b/d, the IEA said.
Following revisions to the historical baseline, the IEA estimates that China's annual demand is now set to average 16 million b/d in 2023, up by 1.3 million b/d on the year.