Global demand for petroleum is slowly increasing, but is bracing for a big boost thanks to the resumption of air travel and China’s economic reopening after COVID-19 restrictions, the International Energy Agency (IEA) said on Wednesday.
“Global oil demand growth started 2023 with a sigh, but is forecast to end the year with a bang,” the Paris-based agency said in its monthly oil report.
“The rebound in jet fuel use and China’s resurgence will trigger a global increase of 3.2 million barrels per day (bpd) in the first and fourth quarters, the largest relative annual increase since 2010.”
The agency kept its forecast for Chinese and global demand relatively flat from the previous month, at 16 million bpd and 102 million bpd, respectively.
Oil supply continues to outstrip relatively sluggish demand, the IEA added, but the market will balance out by mid-year, with China and developing countries boosting demand.
“Real-time indicators of mobility in China mostly stabilized following January’s remarkable rebound, led by air traffic, with domestic flights already well above pre-pandemic levels,” the IEA said.
High inflation and investor concerns about high interest rates cast a shadow over the economic horizon and could pose a risk to fuel demand, the IEA warned, adding that concerns about the health of the U.S. banking sector also carry potential downside risks.
Trading oil reserves of developed OECD countries reached their highest level in 18 months, due to declining demand and rising reserves in Europe, before some Russian imports of crude and refined products were banned.
Russian oil production remained near pre-war levels in February, despite sanctions imposed on its maritime exports.
However, crude exports fell by 500,000 bpd, while the European Union’s new ban on its seafood products and the international price cap imposed by the United States – both from February 5 – reduced exports of Russian products by 650,000 bpd.