According to the International Energy Agency (IEA), the global oil demand is set to reach an all-time high in 2023 as the Chinese economy re-opens after ending its stringent zero-Covid policy. However, the Paris-based watchdog in its report published on Wednesday (January 18) also noted that the ongoing Russian invasion of Ukraine and the Western sanctions on Moscow imposed, as a result, could affect the supply.
The demand for crude oil could surge by 1.9 million barrels per day (bpd) to reach a record 101.7 million bpd, said the IEA in its first monthly oil report of the year. It also noted, “Two wild cards dominate the 2023 oil market outlook: Russia and China”. This comes after crude oil prices soared last year amid fears of disruptions following Moscow’s invasion of Ukraine, however, later they stabilised as the Russian supply more or less continued as well as Europe faced an economic slowdown which also lowered demand to some extent.
However, IEA also said that there is a “high degree of uncertainty” about where the prices of oil could, in part, be attributed to the western sanctions on Russia, particularly the upcoming European Union ban on refined products which will take effect from February 5. The report also noted that despite sanctions, Russian oil output in December was dented only by 200,000 bpd.
“Russian supply slows under the full impact of sanctions, China will drive nearly half this global demand growth even as the shape and speed of its reopening remains uncertain,” said the IEA report. Notably, China’s demand for oil plunged for the first time in almost three decades due to the economic slowdown it faced while Beijing’s stringent Covid restrictions were in place.
However, as the country re-opens it paves the way for an increase in demand due to travel, trade and business activities. According to the IEA, this could, in turn, lead to a tighter global oil market due to increased demand from China and the “full impact” of Western sanctions on Russian oil.
“The preeminent driver of 2023 GDP and oil demand growth will be the timing and pace of China’s post-lockdown recovery,” said the IEA, as per Reuters. The Paris-based agency also said that the main growth of oil supply growth is set to take place from the United States as the OPEC+ will reduce theirs by 870,000 bpd.
(With inputs from agencies)
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