World oil demand will rise more than 2% to a record high of 101.6 million barrels per day (bpd) in 2023, the International Energy Agency said on Wednesday, although sky-high oil prices and weakening economic forecasts dimmed the future outlook.
The Paris-based IEA also said in its monthly report that supply was being constrained because of sanctions on Russia over its invasion of Ukraine.
“Economic fears persist, as various international institutions have recently released downbeat outlooks,” the IEA said, forecasting demand would rise 2.2 million bpd, or 2.2%, in 2023 compared to 2022 and would exceed pre-pandemic levels.
“Similarly, tightening central bank policy, the impact of a soaring U.S. dollar and rising interest rates on the purchasing power of emerging economies mean the risks to our outlook are concentrated on the downside,” it said.
Advanced economies in the Organisation for Economic Co-operation and Development (OECD) would account for most demand growth in 2022, while China would lead the gains in 2023 as it emerges from COVID-19 lockdowns.
China’s recent COVID-19 curbs put the world’s largest oil importer on track for its first fall in demand this century, the IEA said.
The overall demand recovery and constraints on supply because of sanctions on Russia and cautious production increases by OPEC+ pushed oil prices above $139 a barrel in March. Brent crude was trading around $120 on Wednesday.
But the IEA said supplies would soon match demand, adding: “After seven consecutive quarters of hefty inventory draws, slowing demand growth and a rise in world oil supply through the end of the year should help world oil markets rebalance.”
The IEA said the balance could be upset by tougher sanctions on Russia, a steeper recovery in Chinese demand, supply outages in Libya and limited spare production capacity among OPEC+ states.
Output from the OPEC+ producer group is set to rise by 2.6 million bpd this year as it unwinds its cuts, the IEA said, but could contract by 520,000 bpd in 2023 as sanctions on Russian oil take full effect.