Growth in oil demand set to stop by year-end, IEA says

London — Growth in global oil demand is set to grind to a halt in the fourth quarter of this year as an economic slowdown deepens, the International Energy Agency (IEA) said on Wednesday, but added it would resume strongly in 2023.

The outlook preserves a relatively bullish view for robust growth next year despite economic headwinds, built on the expectation that China’s Covid-19 lockdowns will ease while growth in air travel will boost demand for jet fuel.

“Global oil demand remains under pressure from the faltering Chinese economy and an ongoing slowdown in OECD economies,” the Paris-based energy watchdog said in its monthly oil report.

The IEA cut its forecast for demand growth this year by 110,000 barrels a day to 2MMbbl/day and kept its 2023 growth forecast of 2.1MMbbl/day.

Rich countries in the Organisation for Economic Co-operation and Development accounted for most of the rise in demand this year, while countries outside the group especially China will underpin growth next year provided Beijing relaxes its Covid-19 curbs.

“Non-OECD countries will cover three-quarters of 2023’s gains if China reopens as expected,” the IEA added.

Offsetting the hit to demand by the economy, a switch from gas to oil for power generation will provide a 700,000bbl/day boost in the last quarter of 2022 year and the first three months of 2023, especially in Europe and the Middle East.

Meanwhile Russian oil exports are set for a bumpy ride as the EU plans to impose a ban on maritime services transporting it on December 5.

The ban will push Russian oil production down to 9.5MMbbl/day by February next year, the IEA said, a 1.9MMbbl/day drop compared with February 2022. A plan by G7 countries to cap Russian oil sales prices and not ban the trade may ease those losses.

Reuters