Global demand for oil will rise above prepandemic levels next year following three years of Covid-19 lockdowns and the economic shock of the Ukraine war, the International Energy Agency said Wednesday.
Much of the growth in demand next year will be driven by China, as it emerges from stop-start Covid-19 lockdowns, while developed economies are expected to contend with a worsening economic outlook and rampant inflation.
Meanwhile, the IEA expects supply growth to lag behind demand, pushing an already tight market witnessing soaring prices into a 500,000-barrel-a-day deficit. U.S. oil producers are expected to underpin supply increases next year, while members of the Organization of the Petroleum Exporting Countries are seen continuing to struggle to meet their output targets.
Demand for crude will rise by 2.2 million barrels a day to 101.6 million barrels a day in 2023, putting it above its 2019 levels for the first time since the pandemic first hit, the Paris-based agency said Wednesday in its closely watched oil market report. It is the first time the IEA has offered forecasts for 2023.
Developed nations in Europe and North America contributed most to rebounding demand in 2022, but less developed economies that aren’t members of the Organization for Economic Cooperation and Development will make up 80% of oil demand growth in 2022, the IEA said.
China, which has seen economic growth struggle this year as a result of resurgent Covid-19 cases and lockdowns, is expected to see oil demand grow by 930,000 barrels a day in 2023, helping to re-establish its “position as the primary engine of global oil-demand growth,” the IEA said.
Oil producers, however, are expected to struggle to keep up with the rapid pace of rebounding oil demand. The IEA expects global oil supplies to rise by 1.3 million barrels a day to 101.1 million barrels a day in 2023, leaving a 500,000 barrel-a-day deficit.
Oil prices wavered between small gains and losses Wednesday as traders awaited the Federal Reserve’s monetary policy meeting later in the day. Brent crude, the international oil benchmark, ticked down 0.2% to $120.93 a barrel while West Texas Intermediate, the U.S. oil benchmark, weakened 0.2% to $118.68 a barrel.
For the current year, the IEA kept its demand forecast unchanged at 99.4 million barrels a day. In 2019, before the pandemic hit, demand stood at 100.4 million barrels. The IEA raised its 2022 oil supply forecasts by 600,000 barrels a day to 99.8 million barrels a day. That means the agency sees a 400,000 barrel-a-day surplus in the oil market this year.