International Energy Agency (IEA) Executive Director Fatih Birol said Friday (Feb. 17) that the rebound in China’s economy is currently the biggest uncertainty for the world energy markets.
Birol who was attending the Munich Security Conference, explained that although the oil markets are “balanced” at present, producers are focusing on the demand signals that will be coming from China. “How strong this advantage [China’s recovery] will be will decide the oil and gas market dynamics. If it’s a very strong rebound, there may be a need that oil producers will increase their production,” he told CNBC.
In its latest Oil Market Report published Feb. 15, the agency said it anticipates world oil demand will pick up this year, with China accounting for a substantial portion of the projected increase.
“Following a modest year-on-year contraction in 4Q22, global oil demand is set to rise by 2 mb/d in 2023 to 101.9 mb/d. The Asia-Pacific region (+1.6 mb/d), fuelled by a resurgent China (+900 kb/d), dominates the growth outlook. The reopening of borders will boost air traffic. Jet/kerosene demand is expected to increase by 1.1 mb/d to 7.2 mb/d, 90% of 2019 levels” read the report.
On the supply side, the energy agency raised its supply growth estimate for 2023 by 200,000 b/d to 1.2 million b/d, saying the increase would come from outside the OPEC+ producer countries. Record-high output is expected from the US, Brazil, Norway, Canada and Guyana.
Earlier this week, OPEC also raised its demand forecasts for the year. In its latest edition of the Monthly Oil Market Report, the Vienna-based organisation revised its 2023 world oil demand projections up to 2.3 million barrels daily. That represented a 100,000-bpd change from last month’s forecast. Of this, 2 million bpd in demand growth will come from non-OECD countries, the OPEC said.
According to the oil group, the “key” to crude demand growth this year will be the return of China from its Covid-19 economic slumber. Headwinds remain, including “geopolitical tensions” and “global economic concern” as the US Federal Reserve rate hikes that would push the dollar higher, dampening appetite for crude oil and crude oil products.
With reporting by CNBC, Oilprice, TeleTrader