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Global Oil Demand Set to Reach Record High in 2023, Fueled by Chinese Demand and Air Travel

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The International Energy Agency (IEA) has said that global oil demand is set to rise by 2 million barrels per day (bpd) in 2023, to a record 101.7 million bpd, with nearly half the gain coming from China after the lifting of its Covid restrictions. This is 200,000 bpd more than the IEA forecasted last month.[0]

The Organization of Petroleum Exporting Countries (OPEC) has also raised its 2023 global oil demand growth forecast in its first upward revision for months, due to China’s relaxation of COVID-19 restrictions.[1] The energy watchdog, located in Paris, stated in a report for the month that it anticipates oil demand to reach a record high of 101.9 million barrels per day in 2021, with almost all of the growth being driven by soaring demand in Asia.

Key to oil demand growth this year will be the return of China from its mandated mobility restrictions.[2] OPEC noted that “geopolitical tensions” could affect the demand for crude oil and crude oil products in 2023, which they stated as a “global economic concern”.[3] Saudi Arabia and Russia, heading the group, are justified in their circumspect attitude.[4] Before the US mid-term elections in October, production was cut, resulting in a political attack from Washington.[4]

An increase in air travel underscores the importance of jet fuel in 2023’s demand growth. As air travel increases as the pandemic gradually subsides, jet fuel is sure to be a major factor in the worldwide recovery of demand – something that will get a substantial lift from the resumption of international trips from China. OPEC reported that demand for OECD economies had increased by an estimated 0.4 million barrels per day, with an extra 2.0 million barrels per day being seen outside of that group of countries.[5]

But supply-demand balance could quickly shift to deficit as demand recovers.[6] The International Energy Agency (IEA) cautioned that the restraint in the production of OPEC+, which encompasses Russia, could lead to a supply shortage in the latter part of the year, on top of the 1 million barrels per day that have been curbed from Russian output.[7] OPEC estimates that transportation fuels, mainly gasoline and diesel, will see a 1.1 million bpd increase in demand year over year – far surpassing pre-pandemic levels – for oil products.[1] It is anticipated that the demand for jet fuel will grow by 1.1 million barrels per day (bpd) as travel regains its momentum.[8]

0. “Oil Demand to Hit New Record This Year as China Reopens, IEA Says” The Wall Street Journal, 15 Feb. 2023, https://www.wsj.com/articles/oil-demand-to-be-driven-by-asia-this-year-as-china-reopens-iea-says-d5b90631

1. “Transportation fuels drive OPEC to hike its oil demand forecast” UPI News, 14 Feb. 2023, https://www.upi.com/Top_News/World-News/2023/02/14/austria-opec-economy-us-china-oil-russia-inflation/1551676387056/

2. “OPEC Sees Oil Market a Bit Tighter on More Demand, Less Supply By Bloomberg” Investing.com, 14 Feb. 2023, https://www.investing.com/news/commodities-news/opec-sees-oil-market-a-bit-tighter-on-more-demand-less-supply-3002937

3. “OPEC surges global oil request expansion for this year” MENAFN.COM, 15 Feb. 2023, https://menafn.com/1105576669/OPEC-surges-global-oil-request-expansion-for-this-year

4. “Analysis | The OPEC+ Oil Plan for 2023 Brings New Inflationary Risks” The Washington Post, 15 Feb. 2023, https://www.washingtonpost.com/business/energy/the-opec-oil-plan-for-2023-brings-new-inflationary-risks/2023/02/15/4ff6607e-acf3-11ed-b0ba-9f4244c6e5da_story.html

5. “OPEC nudges up 2023 global oil demand forecast” ShareCast, 14 Feb. 2023, https://www.sharecast.com/news/news-and-announcements/opec-nudges-up-2023-global-oil-demand-forecast–12332390.html

6. “WTI recovers above $78 on upbeat IEA’s oil market report” FXStreet, 15 Feb. 2023, https://www.fxstreet.com/news/wti-recovers-above-78-on-upbeat-ieas-oil-market-report-202302150916

7. “China will drive oil demand to record 100m-plus barrels per day, keeping prices elevated” City A.M., 15 Feb. 2023, https://www.cityam.com/china-will-drive-oil-demand-to-record-100m-plus-barrels-per-day-keeping-prices-elevated/

8. “OPEC Raises World Oil Demand Forecast For 2023” OilPrice.com, 14 Feb. 2023, https://oilprice.com/Latest-Energy-News/World-News/OPEC-Raises-World-Oil-Demand-Forecast-For-2023.html

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