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Haitham al-Ghais, secretary-general of Organization of Petroleum Exporting Countries (OPEC) Image Credit: Bloomberg

Davos: OPEC expects global oil supply and demand to be in balance in the first quarter and its top official said he’s “cautiously optimistic” on the economic outlook.

The Organization of Petroleum Exporting Countries will need to provide an average of 28.85 million barrels a day in the first three months of the year, roughly 120,000 barrels a day less than it pumped last month, according to a report from the group’s Vienna-based secretariat.

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The estimates provide further validation for the substantial production curbs OPEC and its allies made late last year, saying they were necessary to keep crude markets in equilibrium. The measures have helped to support international oil prices near $85 a barrel as traders gauge China’s attempts to reopen its economy after almost three years of Covid lockdowns.

Speaking at the World Economic Forum in Davos earlier on Tuesday, OPEC Secretary-General Haitham Al-Ghais said the group is “seeing signs of green” from China as travel and economic activity resume. Still, economic slowdown and persistent inflation in advanced economies are clouding the outlook, he warned.

A panel of key OPEC+ ministers will hold a monitoring meeting to assess market conditions on February 1, but it’s too early to say what they might decide, Al-Ghais added. UAE’s Energy Minister Suhail Al Mazrouei said on Monday that oil are markets are “balanced.”

Heading into the second quarter, the report indicated that OPEC may face a slight surplus if it continues to produce at current rates, with expected demand for the group’s crude dipping to 28.34 million barrels a day.

For the year as a whole, OPEC predicts that world oil demand will increase by 2.2 million barrels a day to average 101.77 million a day, while supplies outside of the group will expand by 1.5 million barrels a day. The estimates are largely unchanged from last month’s report.