IEA ups demand forecast for 2023, signalling recovery

The International Energy Agency (IEA) now expects demand to grow by 1.7 million b/d next year, or 100,000 b/d more than it forecast in November. This comes a day after OPEC raised its global oil demand forecast.

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“Despite the seasonal slowdown in world oil demand and continued macro-economic headwinds, recent oil consumption data have surprised to the upside,” says IEA as it raises its demand forecast for next year, following two straight months of cuts.

The upward revision could be seen as a indication that looming economic recessions in the US and Europe won't affect crude oil demand as much as initially forecast. It could provide much-needed relief to oil market sentiments after last week's 10% drop in Brent futures.

China has eased its Covid-19 restrictions, and the government is relaxing its zero-Covid policy, which is also expected to boost demand for oil. Reuters has cited China's ambassador to the US saying the country will ease Covid-19 restrictions on international travel.

“As we move through the winter months and towards a tighter oil balance in the second quarter of 2023, another price rally cannot be ruled out,” the IEA writes in its December energy outlook report.

The Paris-headquartered energy organisation sees output growth of 770,000 b/d next year and predicts global oil production at 100.8 million b/d, largely unchanged on the month.

“The (OPEC+) bloc cut its collective output ceiling by 2 million b/d from November, but actual crude production fell by only a quarter of that as most of the members were already producing well below their targets,” says the IEA.

According to the IEA, the core OPEC group produced 24.65 million b/d in November, which is 770,000 b/d lower than their combined targets. Iran, Libya and Venezuela are exempt from production targets.

Russia and the other OPEC+ allies produced 15.37 million b/d in November, which is 960,000 b/d lower than their combined target. Russia’s production remained 670,000 b/d below its target in November. It has been the OPEC+ member that has underproduced the most compared to its quota.

By Konica Bhatt

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