“There are many uncertainties, as usual, when it comes to the oil market, and if I have to pick the most important one it’s China,” Birol said in an interview with Bloomberg TV on Wednesday. “Of more than 2 million barrels a day of growth we expect this year in global oil demand, 60% is set to come from China.”
Over the weekend, the Organization of Petroleum Exporting Countries and its allies agreed to extend their existing production cuts by one year to the end of 2024. On top of that, Saudi Arabia said it would make an additional 1 million barrel-a-day output cut in July that could be extended further.
Oil prices rallied initially, but have since faltered as concerns about the strength of demand overshadowed the output cuts. Brent crude traded near $76 a barrel on Wednesday, close to its level before the OPEC+ meeting.
“If the Chinese economy weakens, or growth is much lower than many international economic institutions believe, of course this can lead to bearish sentiment,” Birol said. On the other hand, if China’s economy doesn’t weaken, then the OPEC+ cuts will lead to a tight oil market in the second half, Birol said.