Monday, January 30, 2023

IEA forecasts record global oil demand by 2023

The world demand for oil will register a new record of 101.7 million barrels per day in 2023, driven by the recovery of China and commercial aviation, the International Energy Agency (IEA) anticipates this Wednesday.

In its monthly report on the oil market, the IEA considers that demand will grow this year by 1.9 million barrels per day (mb/d), with aviation fuel as the first engine (840,000 b/d), while it is expected that China contributes a similar figure after the lifting of the restrictions against the covid.

China and Russia will be the two major players in the oil market this year, according to the agency, which brings together most of the OECD countries.

The Asian giant because it will account for almost half of the increase in demand, although the scope of its economic recovery and its reopening after the covid remains “uncertain”.

Russia because it is yet to see the longer-term effect of international sanctions on its oil amid increased global demand.

Prices, which had “extraordinary volatility” in 2022 and ended the year with a decline to the lowest levels in a year, began to recover slightly at the beginning of January.

Despite the fact that higher demand may raise prices in 2023, uncertainty due to the international economic slowdown and the continuation of the war in Ukraine, the increase in refining capacity worldwide and the increase in reserves could moderate these increases.

On the supply side, the United States will be the largest source of the increase in world oil production, along with Brazil, Canada and Guyana, all of which are non-OPEC members.

The authors of the report expect OPEC and its allies (OPEC+) to reduce their production this year by 870,000 b/d, while countries outside the oil cartel will increase it by 1.9 mb/d.


The decline of OPEC+ will be influenced by the impact of international sanctions against Russia, an ally of the Organization of the Petroleum Exporting Countries (OPEC), especially the European Union embargo on Russian oil transported by ship and the $60 price cap. per barrel imposed by the G7.

The IEA recalls that Russian Deputy Prime Minister Alexander Novak said that the country would have to reduce production by a range of 500,000-700,000 b/d, but estimates that Russia will have to cut an even larger volume due to the European embargo.

Specifically, the document estimates that by the end of the first quarter, Russia will be forced to reduce its production by 1.6 mb/d compared to the levels prior to the invasion of Ukraine last February.

That would leave Russian average crude production at 9.7 mb/d in 2023, with a cut of 1.3 md/b in one year, which would mean a drop of 11.8%.

The agency points out that in December Russia earned 3,000 million dollars less from the sale of crude oil, and that it had to carry out “record discounts” to release its production.

In volume, Russian crude oil exports fell by 200,000 b/d during December, up to 7.8 mb/d, as a consequence of international sanctions.

By contrast, Russia last month increased its diesel exports to a record 1.2 million barrels a day, the most in several years, of which 720,000 barrels (60%) were destined for the European Union.

For this reason, the authors of the report predict that the global market, with abundant supply in the first months of 2023, may suffer tensions due to the impact of sanctions on Russian exports, and point out that the risk is greater in refined products, especially the diesel.

They point out that energy saving campaigns, efficiency measures and the release of strategic crude reserves have allowed countries to weather the energy crisis generated by the invasion of Ukraine, but warn that these measures will be “more crucial than ever” during this year.

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