Oil producers may have to reconsider output policies as demand rebounds

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Oil producers may have to reconsider output policies as demand rebounds

After a demand recovery in China, the world's second largest oil consumer, oil producers may have to reconsider their output policies, the International Energy Agency Executive Director Fatih Birol said on Sunday.

China is the world's largest crude importer and No. The 2 buyer of liquefied natural gas has become the biggest uncertainty in the global oil and gas market in 2023, as investors bet on the speed of recovery after Beijing lifted COVID restrictions in December.

Birol told Reuters on the sidelines of the India Energy Week conference that half of the global oil demand will come from China this year.

He said that China's jet fuel demand is exploding, putting upward pressure on demand.

If demand goes up very strongly, if the Chinese economy reboundes, there will be a need for the OPEC countries to look at their output policies, according to Birol.

Producers group OPEC angered the United States and other Western nations in October when it decided to cut output by 2 million barrels a day from November through 2023, instead of pumping more fuel prices and helping the global economy as the U.S. advised.

Birol said he hopes such a situation does not repeat, and that OPEC - which includes members of the Organization of the Petroleum Exporting Countries and allies such as Russia - will return to a constructive role in the market as demand improves.

Production cuts agreed last year were put in place as a result of the group's current output policy, according to OPEC at a meeting on Wednesday.

Birol said price caps on Russian oil would reduce Moscow's revenues from oil and gas exports by almost 30 per cent in January, or about $8 billion, compared to a year ago.

The European Commission and Australia have approved a $100 per barrel price cap on diesel and a $45 per barrel cap on discounted products, such as fuel oil, starting from Feb. 5.

This was the same measure they implemented on December 5 that barred Western-supplied maritime insurance, finance and brokering for Russian crude unless it was sold below a $60 price cap.