Crude oil prices have been growing steadily in recent months with the latest surge triggered by OPEC and other oil producing countries choosing to keep crude production levels steady.

The West Texas Intermediate and Brent crude benchmarks are trading around $US64.32 ($83.40) per barrel and $US67.27 per barrel respectively.

Saudi Arabia is rolling over the current level of cuts into April and May while maintaining its additional 1 million barrel per day (bpd) production cut into April rather than ending it this month.

Only Russia and Kazkhstan will be allowed to boost crude oil production by a small amount according to CNN.

This means that production from the oil cartel remains almost 8 million bpd below pre-pandemic levels.

However, this might be prove to be a wise decision in the long run given that concerns have been raised about China’s actual oil demand.

Bullish sentiment misplaced

While Asian crude oil imports have been strong since the start of 2021, signs have already emerged that Chinese imports could slow down in the second quarter.

Many of China’s independent refiners have already used up their import quotas earlier this year with much of the crude purchased in October and November when oil prices averaged about $US40 per barrel.

To top it off, the recent increase in crude oil prices to $US65 per barrel has slowed demand from both China and India.

Reuters quoted a source at a Chinese refinery as saying that demand is now very slow and there were many cargoes to choose from.

Several refineries will also close for maintenance between March and June, which could further impact demand.

India has also called for OPEC+ to boost production, saying that it does not support “artificial cuts to keep the price going up.”

Demand still expected to rise

Despite this, Saudi Aramco still expects crude oil demand to increase with its chief executive Amir Nasser saying that demand should increase from the current 94 million bpd to about 99 million bpd next year.

The International Energy Agency also believes that with more vaccines for COVID-19 being administered, crude oil demand is expected to grow by 5.4 million bpd in 2021 to reach 96.4 million bpd.

However, this could be impacted by the longer than expected time require to carry out vaccinations that have been experienced by countries that have secured early access to vaccines.