IEA Still Predicts Record Oil Demand in 2023
The International Energy Agency (IEA) is still predicting record world oil demand this year, according to its latest oil market report (OMR).
In its April OMR, the IEA projected that world oil demand will climb by two million barrels per day in 2023 to “a record 101.9 million barrels per day”. Non-OECD countries, buoyed by a resurgent China, will account for 90 percent of growth, the April OMR noted. OECD demand was “dragged down by weak industrial activity and warm weather” and contracted by 390,000 barrels per day year on year in the first quarter of 2023, the report outlined.
“While oil demand in developed nations has underwhelmed in recent months, slowed by warmer weather and sluggish industrial activity, robust gains in China and other non-OECD countries are providing a strong offset,” the IEA stated in its April OMR.
“In 1Q23, OECD oil demand fell 390,000 barrels per day year on year, but a solid Chinese rebound lifted global oil demand 810,000 barrels per day above year-earlier levels to 100.4 million barrels per day. A much stronger increase of 2.7 million barrels per day is expected through year-end, propelled by a continued recovery in China and international travel,” the IEA added.
“For 2023 as a whole, world oil demand is forecast to rise by an average two million barrels per day, to 101.9 million barrels per day, with the non-OECD accounting for 87 percent of the growth and China alone making up more than half the global increase,” the IEA continued.
In its April OMR, the IEA noted that meeting those gains may prove challenging “as the new OPEC+ cuts could reduce output by 1.4 million barrels per day from March through year-end, more than offsetting a one million barrel per day increase in non-OPEC+ production”.
“Growth from the U.S. shale patch, traditionally the most price-responsive source of more output, is currently limited by supply chain bottlenecks and higher costs,” the IEA said in the OMR.
The IEA noted in the report that its oil market balances were already set to tighten in the second half of 2023, “with the potential for a substantial supply deficit to emerge”. The latest OPEC+ cuts risk exacerbating those strains, pushing both crude and product prices higher, the IEA warned in the OMR.
The April OMR projects that global oil production growth will come in at 1.2 million barrels per day in 2023. This figure stood at 4.6 million barrels per day in 2022, the report highlighted.
“Non-OPEC+, led by the U.S. and Brazil, drives the 2023 expansion, rising 1.9 million barrels per day. OPEC+ is expected to drop by 760,000 barrels per day,” the report stated.
Previous OMRs, EIA Forecasts
In its March OMR, the IEA predicted that global oil demand growth would reach 102 million barrels per day in 2023. The IEA noted in that report that it expected non-OPEC+ to drive global output growth of 1.6 million barrels per day this year.
In its February OMR, the IEA projected that demand would reach 101.9 million barrels per day and that global production would rise by 1.2 million barrels per day in 2023. Back in its January OMR, the IEA noted that global oil demand was set to rise by 1.9 million barrels per day in 2023 “to a record 101.7 million barrels per day”. That OMR said world oil supply growth in 2023 was set to slow to one million barrels per day.
According to the U.S. Energy Information Administration’s (EIA) latest short term energy outlook (STEO), which was released on April 11, total world petroleum and other liquids consumption will hit 100.87 million barrels per day and total world production will come in at 101.30 million barrels per day in 2023.
“Although our forecast includes declining production in OPEC and Russia, we expect global liquids fuel production will increase by 1.5 million barrels per day in 2023 because of strong growth from non-OPEC countries, which (excluding Russia) increase by 2.3 million barrels per day in our forecast,” the latest STEO noted.
Non-OPEC production growth is largely driven by countries in North and South America, according to the STEO, which noted that global liquids production rises by an additional two million barrels per day in 2024, “driven by non-OPEC production growth of one million barrels per day and by OPEC crude oil production, which we expect to increase by 0.9 million barrels per day when current production cuts expire at the end of 2023”.
“We forecast that global liquid fuels consumption will rise by 1.4 million barrels per day in 2023 and by 1.8 million barrels per day in 2024,” the EIA added in the STEO.
“However, increasing risks in the U.S. and global banking sectors increases uncertainty about macroeconomic conditions and their potential effects on liquid fuels consumption, which increases the possibility of liquid fuels consumption being lower than our current forecast,” the EIA warned.
In its previous STEO, which was released in March, the EIA projected that total world petroleum and other liquids consumption would hit 100.90 million barrels per day and total world petroleum and other liquids production would come in at 101.47 million barrels per day in 2023.
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