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IEA: Demand rebounds; world oil use to reach new record next year
Allen Baker for Petroleum News
Worldwide demand for oil has rebounded sharply, and will surpass the pre-pandemic record next year, the International Energy Agency reports, with total consumption rising to 101.6 million barrels each day in 2023.
The strong demand for oil products has confounded many analysts.
In its 2020 annual statistical report released just a bit more than a year ago, BP said that the rise in electric vehicles, reduced commuting as people worked from home, increased energy from renewables, and other developments would dampen demand for oil, so that 2019’s 100.4 million barrels a day would stand as the peak for oil demand.
That BP prediction came after oil demand dropped by 9% between 2019 and 2020 to just 91.3 million barrels a day. The recent roaring consumption - in the face of a huge increase in costs - seemingly came from nowhere.
Actually, it came from Asia.
“A resurgent China will drive gains next year, with (world demand) growth accelerating from 1.8 mb/d (million barrels per day) in 2022 to 2.2 mb/d in 2023,” the IEA said in its Oil Market Report released June 15. While the “developed world” is providing the demand push in 2022, “non-OECD economies are set to account for nearly 80% of growth next year.” The 38-member OECD is the Organization for Economic Co-operation and Development.
Tight Market With rising demand and disruptions due to sanctions and boycotts of Russian oil, the supply-demand relationship will remain tight, the IEA predicts. Nations outside the OPEC+ marketing group will provide most of the production gains, as “tighter sanctions force Russia to shut in more wells, and a number of producers bump up against capacity constraints.” Plus there’s the steep drop in Libya’s output.
Non-OPEC+ producing nations will add 1.9 million barrels of daily production this year and 1.8 million in 2023, much of it coming from the United States.
Refiners will barely keep up, with some 1.0 million bpd of new capacity this year and 1.6 million bpd in 2023 from projects in Africa, the Middle East and Asia. Shortages are expected to persist and keep prices up. Diesel and other middle distillates will remain at record highs, “with a knock-on effect for other products which could cause more pain at the pump as pent-up demand is unleashed during peak driving and summer cooling season,” IEA says.
So even with June oil prices 70% above the levels just a year ago, consumers may complain loudly but aren’t deterred from buying. And if IEA is right, they won’t be deterred next year either.
- ALLEN BAKER
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