Will an increase in oil demand from China following the end of its COVID-19 restrictions drive the price of oil higher? Tom Wilson reports on IEA projections that demand will reach new highs. He writes in the Financial Times:
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 a record 101.7mn b/d, while the evolving impact of western sanctions on Russia threatens to constrain supply, 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 robust demand growth would tighten “the balances as Russian supply slows under the full impact of sanctions”.
Crude prices soared last year to near record highs amid fears of disruption to oil markets following Russia’s full invasion of Ukraine, but then fell back as Russian supply held up and an economic slowdown crimped demand, particularly in Europe.
The Paris-based IEA, which advises governments on energy policy, said 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, it 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.
Prices for Brent crude, the international benchmark, climbed 1.4 per cent on Wednesday morning to more than $87 a barrel.
Growing optimism that Chinese demand will recover this year has helped oil prices rally by around 10 per cent in the past week.
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.
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