The oil market is set to swing from a comfortable supply overhang in the first half of 2023 to a deficit in the latter part of the year as the economic rebound in China will push global oil demand to a record high, the International Energy Agency (IEA) said on Wednesday.
World oil demand growth is set for a sharp acceleration over the course of this year, from an estimated increase of 710,000 barrels per day (bpd) in the first quarter to a growth of 2.6 million bpd in the fourth quarter of 2023, the IEA said in its Oil Market Report today.
Between Q1 2023 and Q4 2023, global oil demand is set to surge by 3.2 million bpd, taking average growth for the year to 2 million bpd.
Global oil demand is set to reach a record 102 million bpd this year, the agency said, leaving its projections from last month’s report largely unchanged.
“Rebounding air traffic and the release of pent-up Chinese demand dominate the recovery,” the IEA said in today’s report.
Countries outside the OPEC+ group will lead supply growth, and this growth will be enough to meet demand in the first half of 2023. However, non-OPEC+ growth is expected to fall short in the second half “when seasonal trends and China’s recovery are set to boost demand to record levels,” the agency noted.
Even with Russia’s 500,000-bpd production cut for March, global oil supply “should comfortably exceed demand in the first half of the year.”
“Building stocks today will ease tensions as the market swings into deficit during the second half of the year when China is expected to drive world oil demand to record levels,” the IEA said.
“Matching that increase would be a challenge even if Russia were able to maintain production at pre-war levels,” the IEA said.