OPEC Sees China Spearheading Global Increase in Summer Oil Demand

Global oil demand will probably intensify this summer, OPEC said Thursday, as the U.S. vacation season heats up alongside increased demand in Asia.

In its summer oil market outlook, OPEC said global demand will likely rise 2.5% in this year's second and third quarters compared with the same periods a year ago.

That's up from an estimated 2.1% year-to-year increase in this year's first quarter, when OPEC estimated global demand averaged 101.6 million barrels a day. By the third quarter, OPEC estimates that figure will increase by another 480,000 barrels a day, surpassing 102 million.

What that means for gasoline prices remains unclear. U.S. prices already have surged in recent weeks. Meanwhile, refineries in many parts of the world have capacity limitations, even as U.S. refineries ramp up normal summer production.

Summer Driving in the U.S.

OPEC said a rebound in China's economy after the easing of pandemic restrictions and solid demand throughout the Middle East and Asia should help feed this summer's increased oil needs.

So too will U.S. drivers -- if the economy behaves.

"Heightened mobility in the upcoming driving season in the U.S. is expected to provide the usual additional demand for transportation fuels," OPEC said. "However, any weakening in the economy on the back of ongoing monetary tightening measures by the Federal Reserve may offset some of this seasonal dynamic."

Earlier this week, the U.S. Energy Administration (EIA) predicted summer driving demand would push average summer gasoline prices across the country to $3.50 a gallon, peaking at between $3.50 and $3.60 in June.

Average U.S. prices reached that level last week, the EIA's weekly price report indicated. Prices have risen 18 cents to $3.60 in the past two weeks.

Refinery Limitations and China's Surge

The demand increase from the U.S. and five other economies in North and South America--Canada, Mexico, Costa Rica, Columbia and Chile--will pale in comparison, though, to that from China, OPEC predicted.

China will likely account for about 40% of second quarter demand gains and about a third of the third quarter's. That increase will occur about the same time Asia's refineries enter their peak annual maintenance periods, which will limit the amount their oil "intake" for fuel production.

In addition, strikes in France have hampered refinery operations there. Moreover, China's reopening has "not been sufficient to reverse the declining trend in global refinery intakes," which steadily have declined since November, OPEC said.

Global crude oil prices have increased in recent weeks. Since hitting a 15-month low in March, they've surged 20% after OPEC+ countries announced a surprise production cut last week and China's March imports reached a three-year high.

Prices for Brent crude, the global benchmark, fell to $86.26 per barrel today, down 1.2%, after reaching their highest level since late January on Wednesday.