By Nicholas Earl
Global oil demand will reach a record high this year, and rise by nearly two million barrels per day (bpd), as China eases its strict Covid-19 pandemic restrictions, according to the International Energy Agency (IEA).
The Paris-based climate group’s latest oil market report, published today, forecasts that demand will increase by 1.9m bpd this year, with nearly half the gains coming from China.
It predicts jet fuel will remain the largest source of growth – up 840,000 bpd over the coming 12 months.
The IEA argued China would be one of two wild cards to dominate the oil market this year – the other being Russia, which is grappling with Western sanctions, putting pressure on supplies.
It said this also contributed to a “high degree of uncertainty” for its outlook.
In contrast to rising demand, the IEA expects world oil supply growth to fall to one million bpd, with OPEC+ driving the slowdown in supply increases.
While OPEC+ led growth of 4.7m bpd in 2022, the IEA is now pricing in a 870,000 bpd drop due to anticipated declines in supplies in Russia.
The IEA recognised Russian oil supply had “held steady” in December, at 11.2mn bpd, despite the introduction of EU sanctions on the import of Russian crude.
However, it forecast that the “well-supplied” global oil market at the start of the year could “quickly tighten” when Western sanctions take effect – including an EU ban on the import of refined Russian products from February 5.
Russian oil exports fell 200,000 bpd in December to 7.8m bpd, as crude shipments to the EU declined after its crude embargo and the G7 price cap of $60 per barrel on Russian oil came into effect.
This will offset a 1.9m bpd increase in non-OPEC supplies, with the US ranking as the world’s leading source of supply growth.
Alongside Canada, Brazil and Guyana, it is expected to hit an annual production record for a second straight year.
The report follows crude prices soaring to 14-year highs last March, with Brent Crude peaking at $139 per barrel – a rally that was driven by disruption to oil markets following Russia’s full invasion of Ukraine and fears of supply shortages. Prices then fell back as an economic slowdown weighed down on demand.
Prices for Brent Crude were up 1.3 per cent Wednesday lunchtime, trading at $87.19 per barrel.
Rising optimism surrounding China’s reopening this year has driven a 10 per cent rally in oil prices over the past week.
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