The latest report from the International Energy Agency (IEA) states that global oil demand is expected to increase by 2 million barrels per day (bpd) in 2023, reaching a new record of 101.9 million bpd due to China’s economic recovery after the COVID-19 pandemic.
The growth in demand will mainly come from non-OECD nations, with China accounting for more than half of the increase. While oil demand in developed nations has been slow due to warmer weather and weak industrial activity, the rebound in China and other non-OECD countries will offset this. In Q1 2023, OECD oil demand decreased by 390 kb/d compared to the previous year, but a strong recovery in China boosted global oil demand to 100.4 mb/d, up by 810 kb/d from the previous year.
Following the removal of coronavirus restrictions, China has experienced a rebound in consumer spending, industrial output, and investment during the first two months of 2023. Many experts predict that China’s growth momentum will continue to improve in the coming months, primarily driven by consumer spending. OPEC has maintained its forecast that global oil demand will increase by 2.32 million barrels per day or 2.3% in 2023, with non-OECD countries expected to account for most of the growth.
However, the surprise OPEC+ supply cuts announced on April 2 could worsen an already expected oil supply deficit in H2 2023, leading to higher oil prices, even as industrial activity slows in major economies. The OPEC’s move has already caused oil prices to rally towards $87 a barrel from below $80. The IEA warns that the latest cuts risk exacerbating the existing oil market balances, potentially leading to a substantial supply deficit and pushing crude and product prices higher, which could cause inflation to worsen, especially in emerging and developing economies.
