Oil prices could return to the $100 per barrel mark in the second half of 2023 on the back of rising Chinese demand and expected limited additional supply, Afshin Javan, Iran’s OPEC representative, told Reuters on Wednesday.
Iran is exempted from the OPEC+ production cuts and quotas due to the U.S. sanctions on its oil industry and exports.
OPEC and OPEC+ did a fine job when they decided at the end of last year to reduce the collective target output, Javan said.
OPEC+ decided to cut the target by 2 million barrels per day (bpd) from November 2022 to December 2023 or until they decide otherwise. Yet, the actual cut is estimated to have been around 1 million bpd. OPEC and the OPEC+ group, which includes Russia and a dozen other non-OPEC producers, are pumping crude oil at levels well below the collective target OPEC+ set as of November 2022.
“Why OPEC did it was because it was not very optimistic about the demand side,” Iran’s Javan said on the sidelines of an energy forum in India, commenting on the OPEC+ decision from October 2022 to reduce target oil production.
Last week, the OPEC+ panel recommending policy actions, the Joint Ministerial Monitoring Committee (JMMC), decided that the group should keep production targets and quotas unchanged in a widely-expected move considering the uncertainties in both supply and demand.
Now the Chinese reopening will drive up oil demand this year and tighten the market again, Javan said.
In a sign that OPEC’s heavyweights expect a rebound in Chinese demand, Saudi Arabia, the world’s top crude oil exporter, unexpectedly raised earlier this week the official selling price (OSP) of its flagship crude going to Asia in March. The hike was the first in six months, likely reflecting Saudi expectations that demand in Asia will be rising from the second quarter onwards.