Oil demand to hit record 101.7mn bpd on China reopening, jet rebound: IEA

Quantum Commodity Intelligence – Global oil demand is set to rise 1.9 million bpd this year to a record 101.7 million bpd, the IEA said Wednesday, with nearly half the gain attributable to China's relaxation of strict Covid measures.

Jet fuel will account for most of the rest at around 840,000 bpd of additional demand this year, the International Energy Agency (IEA) said in its latest monthly report, as a well-supplied oil market at the start of 2023 could quickly tighten as sanctions hit Russian exports.

"Two wild cards dominate the 2023 oil market outlook: Russia and China," the IEA said.

China will drive nearly half of global demand growth in 2023 as it unwinds years of restrictive Covid restrictions, "even as the shape and speed of its reopening remains uncertain."

Product markets, especially diesel, are most at risk as demand growth recovers owing to looming sanctions on Russian supply. 

Fresh supply from new plants in the Middle East and China should help compensate for the disruption to a record 1.2 million bpd of Russian diesel exports last month, the IEA said, with 60% landing in the EU. 

Global refinery throughputs are set to grow by 1.5mn bpd in 2023, helped by 2.2mn bpd of capacity additions.

The US will be the this year's leading source of supply growth and, along with Canada, Brazil and Guyana, will likely hit an annual production record for a second straight year.

Energy efficiency gains and record sales of electrical vehicles will trim global 2023 demand growth by close to 900,000 bpd, the IEA said, which are "especially vital in a supply-constrained oil market."

"Accelerating efficiency gains, supporting EV uptake and prudent handling of government stocks will be more crucial than ever," the agency said.

Meanwhile, the IEA's Executive Director Fatih Birol believes Russia will lose its energy war with the West, saying China and India's crude oil purchases will likely fall short of offsetting the fall in shipments to Europe.

"Europe is having major economic problems, but for Russia, Europe was a very, very important client," Birol told CNBC at the World Economic Forum in Davos, Switzerland.

"Russia will face major difficulties both for oil and gas exports and, in my view, when we look at the next couple of quarters and years, Russia will lose the energy battle," Birol said.