BY HABEEB ADAMU
Global oil demand will rise more than 2 percent to a record high of 101.6 million barrels per day (bpd) in 2023, the International Energy Agency (IEA) said in its latest monthly oil market report on Wednesday.
The Paris-based autonomous intergovernmental energy authority said demand would rise 2.2 million bpd, or 2.2 percent, in 2023 compared to 2022 and would exceed pre-pandemic levels.
The implication is that global oil supply may struggle to keep up with demand next year as China emerges from COVID-19 lockdowns at a time Russia begins to feel the full force of sanctions over its invasion of Ukraine. The sanctions are currently constraining supply, the IEA said.
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“Economic fears persist, as various international institutions have recently released downbeat outlooks,” the IEA said. “Similarly, tightening central bank policy, the impact of a soaring U.S. dollar and rising interest rates on the purchasing power of emerging economies mean the risks to our outlook are concentrated on the downside.”
The IEA said that most demand growth in 2022 would be accounted for by advanced economies in the Organisation for Economic Co-operation and Development (OECD), while China would lead the gains in 2023 as it recovers from COVID-19 lockdowns. It said China’s recent COVID-19 curbs put the world’s largest oil importer on track for its first fall in demand this century.
Oil prices traded above $139 a barrel in March as a result of the overall demand recovery and constraints on supply because of sanctions on Russia and cautious production increases by OPEC+. As of Wednesday, Brent crude was trading around $120 per barrel.
But the IEA said supplies would soon match demand.
“After seven consecutive quarters of hefty inventory draws, slowing demand growth and a rise in world oil supply through the end of the year should help world oil markets rebalance,” the IEA said.
The balance could be upset by tougher sanctions on Russia, a steeper recovery in Chinese demand, supply outages in Libya and limited spare production capacity among OPEC+ states, it said.
The IEA said output from the OPEC+ producer group could rise by 2.6 million bpd this year as the cartel unwinds its cuts. The output could contract by 520,000 bpd in 2023 as sanctions on Russian oil take full effect, it said.