Forbes Piece: IEA Raises Global Oil Demand Forecast Again

DAVOS, SWITZERLAND - JANUARY 17: International Energy Agency's (IEA) Executive Director Fatih Birol makes a speech as he attends a session of the World Economic Forum (WEF) on specializing in energy economics in Davos, Switzerland on January 17, 2023

ANADOLU AGENCY VIA GETTY IMAGES

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The International Energy Agency raised its forecast for global crude oil demand for 2023 in its Oil Market Report for February. Citing the re-opening of China’s economy as the main driver of rising demand, IEA analysts raised the 2023 forecast to 101.9 million barrels per day (bpd), an increase of 200,000 bpd from the agency’s January report.

This latest in a series of increases raises the projection for 2023 to 2 million bpd above the 2022 number, a clear admission that the world’s appetite for crude continues to grow despite efforts by mainly western governments to subsidize a transition away from fossil fuels into existence. As that appetite grows, some other recent developments in the oil markets raise the potential for a supply shortage developing in the coming months, as the IEA notes in its report.

“Nearly a year on from Russia’s invasion of Ukraine, global oil markets are trading in relative calm,” the report says, “Oil prices are back to pre-war levels with the exception of diesel, though even these have drifted much lower from last summer’s historical highs. World oil supply looks set to exceed demand through the first half of 2023, but the balance could quickly shift to deficit as demand recovers and some Russian output is shut in.”

As I noted last week, Russia announced it would cut its crude exports by 500,000 bpd beginning March 1, an apparent admission that sanctions implemented by the G7 and cooperating nations are having their intended impact. A cut of that magnitude would essentially offset the U.S. Energy Information Administration’s (EIA) projected rise in U.S. crude production during 2023, negating hopes that the U.S. industry’s contribution to growth would help keep the markets in balance.