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Global oil prices earlier this week hit US$90 per barrel for the first time this year, on the back of the export cuts by the OPEC+ group comprising the Organization of the Petroleum Exporting Countries (OPEC) and allies such as Russia, set to continue for the rest of 2023.
“There’s a lot of skepticism about continued growth and demand, with China kind of being a big shadow over demand. The expectation was for a great turnaround from post-COVID times in terms of growth in China,” said Mr McMonigle.
“The macro commodities market is factoring in fears of a global recession and economic data from China, and trying to translate that to demand scenarios that don’t necessarily show up on the physical markets because they are quite tight.”
Between China and India, there has been an increase in demand of almost 2 million barrels a day in the second half of this year, said Mr McMonigle.
Along with the OPEC+ cuts, the pipeline from Iraq to Turkey has been shut since March, affecting global supply by about 300,000 to 400,000 barrels a day, while Kuwait’s new refinery means it has been diverting exports there, reducing supply by about 500,000 barrels a day, he said.
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