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OPEC+ On Alert As World Bank Slashes China's Growth Forecasts

OPEC+ continues to work to balance oil markets, cautiously eyeing China growth, the UAE Minister of Energy told a conference just two days ahead of the alliance’s October 4 ministerial panel meeting. 

"Many dynamics are moving on and we hope that the growth in China picks up ... because the whole world economy is dependent on China," UAE Minister of Energy and Infrastructure Al Mazrouei told the Adipec conference. 

"My worry is not an undersupplied market in the short term. My worry is an undersupplied market in the longer and mid term,” the minister said, as reported by The National News

The comments come as the World Bank cuts growth estimates for China, the world’s second-largest economy and biggest importer of crude oil. On Monday, the World Bank forecast growth in China at 5.1% for this year, which is well above the 3% in 2022. However, that growth pace has slowed since April due to what the World Bank described in its October economic update as “subdued domestic demand and persistent difficulties in the real estate sector”. 

The concern, shared by OPEC+, is that slower Chinese GDP growth could reduce demand for crude oil. 

The World Bank also cut its 2024 China GDP growth projection to 4.4% from 4.8%. 

On Sunday, the Caixin/S&P PMI (manufacturing purchasing managers’ index) showed September PMI falling to 50.6, down from 51.0 in August, with the 50.0 mark being the mid-point between growth and contraction.  

In its next ministerial panel meeting on October 4, market watchers are waiting to see whether Saudi Arabia and Russia will make any changes to their current voluntary output cuts of 1.3 million barrels per day. 

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By Charles Kennedy for Oilprice.com

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  • Mamdouh Salameh on October 02 2023 said:
    China’s economy at $33.0 trillion in 2023 is the world’s largest economy based on purchasing power parity (PPP) compared with $26.85 trillion for the United States also based on PPP. In fact China’s economy is 23% bigger than the United States’ which is the second-largest economy and not the largest as the author mentioned.

    Moreover, I have my doubts about the timing of the World Bank’s cutting China’s economic growth in 2023 and 2024. It has all the markings of a deliberate ploy to arrest the surge in oil prices.

    How could this be the case when the Chinese economy grew at 6.3% in the second quarter of 2023 exceeding projections by both the World Bank and the IMF? And how could this be right when China’s crude oil imports which are the most accurate of economic growth have been breaking records this year?

    Even with this dubious cut, China’s growth rate in 2023 is still more than twice that of the United States’ and more than six times the EU’s.

    The World Bank’s projection for China’s growth in 2024 is 4.4% (reduced from 4.8%) compared with 0.8% for the United States and 1.4% for the EU.

    OPEC+ shouldn’t worry about such questionable projections. They should know by now that they are no different from the IEA’s projections which are always aimed at depressing oil prices and global demand for the benefit of the OECD’s Western consumers.

    Even if the unthinkable did happen and China’s oil imports declined a bit in 2024, they would be offset by a tightening market and the possibility of shortages in coming months. So OPEC+ should keep its shin up.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

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