Global oil demand is expected to rise by 1.7 million barrels per day (bpd) this year compared to 2022, the International Energy Agency (IEA) said on Wednesday, revising down by 100,000 bpd its demand growth estimate on the back of high prices weighing on consumption.
“Higher prices and a deteriorating economic environment have started to take their toll on oil demand, but strong power generation use and a recovery in China are providing a partial offset,” the agency said in its closely-watched Oil Market Report (OMR) published today.
Total global oil demand is expected to average 99.2 million bpd in 2022, up by 1.7 million bpd compared to 2021, the IEA said in its July forecast.
In June, the agency had expected annual growth of 1.8 million bpd in oil demand for 2022. A month ago, the IEA saw 2023 demand rising further by 2.2 million bpd to a record 101.6 million bpd. Today’s report downgrades the forecast by 100,000 bpd to an expected increase of 2.1 million bpd next year.
Demand growth in 2023 is set to be driven by a strong growth trend in developing economies, the agency said.
However, the IEA warned that “Rarely has the outlook for oil markets been more uncertain.”
“For now, weaker-than-expected oil demand growth in advanced economies and resilient Russian supply has loosened headline balances,” according to the agency.
High fuel prices have already started to dent oil consumption in the OECD, but this was largely offset by a stronger-than-expected demand rebound in emerging and developing economies led by China, the IEA said.
While oil market sentiment has materially deteriorated since June amid expectations of economic slowdown and fears of recession, “price premiums for physical barrels widened on rising seasonal demand for both crude and products while supply remains constrained,” the agency noted.
“As an EU embargo on Russian oil is set to come into full force at the end of the year, the oil market may tighten once again. With readily available spare capacity running low in both the upstream and downstream, it may be up to demand side measures to bring down consumption and fuel costs that pose a threat to stability, most notably in emerging markets,” said the IEA.