Set to average a record 101.9 million barrels per day, up by two million bpd from 2022
Chinese crude consumption is under the spotlight. Markets are again looking towards Beijing, the world’s top crude importer, for direction. With COVID-19 restrictions gone, China is on the move – defining the global energy dynamics.
Pushed up by growth in Chinese consumption, the International Energy Agency (IEA) has now raised its 2023 demand growth estimate by 100,000 barrels per day (bpd) from its earlier forecast in January.
This year, world oil demand is set to average a record 101.9 million barrels per day (bpd), up by two million bpd from 2022, the IEA said in its monthly Oil Market Report released last week. This is 100,000 bpd higher than the 1.9 million bpd rise projected in its January report.
China’s resurgent oil demand – with growth seen at 900,000 bpd this year – along with the rest of the Asia-Pacific region, will dominate global growth, the IEA said.
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“World oil demand growth is picking up after a marked slowdown in the second half of 2022 and a year-on-year contraction in the fourth quarter. China accounts for nearly half the two million bpd projected to increase this year, with neighbouring countries also set to benefit after Beijing ditched its zero-Covid policies,” the IEA said in the report.
China is expected to import a record amount of crude oil in 2023 due to the increase in demand. China’s crude imports may rise between 500,000 and one million bpd this year to as high as 11.8 million bpd, reversing the previous two years’ decline to exceed 2020’s record of 10.8 million bpd, Reuters quoted analysts from four industry consultancies – Wood Mackenzie, FGE, Energy Aspects and S&P Global Commodity Insight – as saying. These estimates align with the forecast made by the International Energy Agency.
Goldman Sachs also expects China’s oil demand to grow by 1.1 million bpd this year after the reopening from Covid restrictions, while JP Morgan says oil demand will grow in China by 770,000 bpd. This is a smaller increase than predicted by the Organization of Petroleum Exporting Countries (OPEC) and the International Energy Agency. Yet all seem to agree that Chinese consumption is set to grow this year.
The surging increase in oil demand is impacting the global energy markets. As OPEC seems determined to keep supplies under a tight leash in the foreseeable future, speculation is growing that markets could be getting tight over the next few months.
Reports underline that Saudi Arabia has pledged to hold OPEC+ oil supplies steady. Saudi Energy Minister Prince Abdulaziz bin Salman vowed last week that the producer group would stick firmly to current output quotas. “The agreement that we struck in October is here to stay for the rest of the year, period,” he said.
If the Organization of Petroleum Exporting Countries follows through on the plan, global oil markets will be distinctly divided this year. According to Bloomberg, OPED data suggest supply and demand will be fairly balanced in the first half before swinging to a deficit in the second.
Brent crude has dipped three per cent since the end of 2022 to below $83.50 a barrel. Yet commodity analysts, including those at Goldman Sachs Group Inc. and Morgan Stanley, see it rising to $100 later this year.
World oil consumption is expected to remain subdued in the first six months of 2023 amid lingering fears of recession but then pick up as China’s economic reopening gathers pace and stimulates other Asian economies. “World oil supply looks set to exceed demand through the first half of 2023, but the balance could quickly shift to a deficit as demand recovers and some Russian output is shut in,” the IEA also emphasized.
And the recent Russian announcement of cutting its output by 500,000 bpd for March would also tighten the global energy markets. Its announcement, however, may also signify that Moscow may be struggling to place all its barrels in the market, the IEA said.
While the IEA Monthly Oil Market Report says that “nearly a year on from Russia’s invasion of Ukraine, global oil markets are trading in relative calm,” with China opening up and overall global demand rising, some tightening of crude markets seems in the cards over the next few months.
Toronto-based Rashid Husain Syed is a respected energy and political analyst. Energy and the Middle East are his areas of focus. Besides writing regularly for major local and global newspapers, Rashid is also a regular speaker at major international conferences. He has provided his perspective on global energy issues to the Department of Energy in Washington and the International Energy Agency in Paris.
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