Global oil demand to rise with non-OECD accounting for 87% growth

The International Energy Agency (IEA) kept its global oil demand forecast unaltered from the previous report, with demand set to rise by 2 million barrels per day (bpd) this year to a record 101.9 million bpd.

Global oil demand returned to growth in the first quarter of 2023, climbing by 810,000 bpd as the Chinese economy emerged from lockdowns, the IEA said in its monthly oil market report published on Friday.

According to the report, growth will gather momentum over the course of the year, with gains of 2.4 million bpd in the second half of 2023, lifting demand to 103.1 million bpd.

‘The contrast between a lackluster OECD and resilient non-OECD continues to sharpen,’ the report noted.

‘OECD demand, dragged down by weak industrial activity and warm weather, contracted by 390,000 bpd year-on-year in the first quarter of 2023, its second consecutive quarter of decline,’ the agency said, adding that ‘for the year as a whole, OECD demand is forecast to rise by 260,000 bpd year-on-year in 2023, 150,000 bpd less than in last month’s forecast.’

However, non-OECD oil demand posted ‘substantial growth’ in the first quarter of 2023, rising by an estimated 1.2 million bpd year-on-year.

‘Strong recent reported data, most notably for China in January and February, mean that we increased our 1Q23 non-OECD growth expectation by 670,000 bpd compared with last month’s report. Substantial 2023 gains of 1.8 million bpd, dominated by jet/kerosene with 730,000 bpd and gasoline with 430,000 bpd, will see oil use reach 55.7 million bpd,’ the report explained.

Non-OECD economies account for 87% of all forecast demand growth in 2023.

– Global oil production decreases

Global oil supply in March fell by 450,000 bpd to 101.21 million bpd.

The daily crude oil production of the OPEC group decreased to 29.09 million bpd in March, a drop of about 140,000 bpd compared to the previous month. Production of OPEC natural gas liquids was recorded at 5.35 million bpd, bringing OPEC’s total oil production to 34.44 million bpd last month.

Non-OPEC production also saw a decline of around 310,000 bpd to 66.77 million bpd in March.

According to the report, global oil production fell largely because of Russia, which had announced that it would turn down the taps by 500,000 bpd ‘purportedly due to sanctions and G7 price caps.’

‘Based on our estimates, Moscow appears not to have delivered in full, but its decline helped push down total oil supply in the month to 101.2 million bpd,’ the report said.

– OPEC+ cuts to tighten oil market further

The IEA warned that the unexpected supply cuts announced by some OPEC+ countries on April 2 are likely to tighten the global oil market balance for the rest of the year.

OPEC+ oil production is expected to plunge by 1.4 million bpd from March through December after extra curbs of 1.66 million bpd kick in next month and remain in place for the rest of the year.

‘With supply from those outside the non-OPEC+ set to rise by around 1 million bpd, global output will reach 100.8 million bpd by the end of 2023, down 400,000 bpd from March,’ the report said.

• The International Energy Agency (IEA)