Global oil demand is set to rise to an all-time high in 2023 as China relaxes its Covid-19 restrictions in a move that may push crude prices higher in the second half of the year, according to the International Energy Agency.
Demand for crude oil could rise 1.9mn barrels a day to reach an all-time high of 101.7mn b/d, the IEA said in its first monthly oil report of 2023.
“Two wild cards dominate the 2023 oil market outlook: Russia and China,” the report said, adding that such robust demand would tighten “the balances as Russian supply slows under the full impact of sanctions.”
Russian oil supply had “held steady” in December at 11.2mn b/d despite the introduction of EU sanctions on the import of Russian crude.
However, the Paris-based IEA forecast that the “well-supplied” global oil market at the start of the year could “quickly tighten” as western sanctions — particularly an EU ban on the import of refined Russian products from February 5 — take full effect.
The IEA said nearly half of the forecast rise in oil consumption this year would come from China even though “the shape and speed” of the country’s reopening remained uncertain.
Coronavirus restrictions in China, which depressed economic activity last year, meant that Chinese oil demand in 2022 fell for the first time since 1990, declining by an average of 390,000 b/d, its biggest annual fall.
But the loosening of quarantine and testing measures in November, followed by Beijing’s abrupt decision to abandon its zero tolerance Covid regime in early December, had already boosted Chinese consumption, the IEA said. Chinese oil demand in November rose by 470,000 b/d compared with October, according to IEA data.