World oil demand to hit record as China reopens: IEA

PARIS: World oil demand is set to hit a record in 2023 as top consumer China emerges from Covid restrictions and air travel recovers from the pandemic, the International Energy Agency (IEA) said Wednesday.

Demand is expected to reach 101.9 million barrels per day on average in 2023, an increase of two million barrels per day from last year, the IEA said in its monthly oil market report.

It would be up 1.4 million barrels a day from the pre-pandemic level in 2019 as consumption of fossil fuels behind global warming has yet to peak.

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The Asia-Pacific region accounts for most of the increase in demand, with China alone accounting for nearly half of the expected 2023 growth after it lifted its zero-Covid policy in December.

China’s reopening is also expected to boost air travel, which has yet to recover to pre-pandemic levels, driving demand for jet fuel up by 1.1 million barrels per day.

Demand for oil products is expected to drop given weak manufacturing activity and demand for petrol will decline further as vehicle efficiency improves and electric vehicles gain market share.

On the supply side, production remained stable at around 100.8 million barrels per day in January, according to the IEA.

Russian exports held up well despite the entry into force in December of an EU embargo on oil imports by sea and a G7 decision to put a price cap in place.

The IEA expects world oil output to rise by 1.2 million barrels per day in 2023, with the gains driven by the United States, Brazil and Norway.

It said production increases should outpace demand growth in the first quarter and match it in the second.

“A substantial deficit could emerge in (the second half of 2023) as China’s reopening drives demand higher,” while Russian output will likely be constrained by Western sanctions, it said.

Russia’s announcement this month that it will cut output by five percent, or 500,000 barrels per day, in March is “a sign that Moscow may be struggling to place some of its barrels”, the IEA said.