In the first of its monthly oil reports for this year, the IEA predicts that the global demand for oil will reach a new record high this year, with almost half the demand growth being driven by China’s relaxation of its longstanding COVID-19 restrictions.
The IEA notes in the report that China and Russia are the two main factors affecting the outlook for the oil market, adding:
“This year could see oil demand rise by 1.9 mb/d to reach 101.7 mb/d, the highest ever, tightening the balances as Russian supply slows under the full impact of sanctions. China will drive nearly half of this global demand growth, even as the shape and speed of its reopening remains uncertain.”
On the other hand, the IEA predicts that demand growth will be mitigated by 900,000 barrels per day (bpd), thanks to increasing sales of electric vehicles and general efficiency improvements. The organisation notes that this is especially significant given that the supply of oil to the market will likely be constrained later this year.
Despite US producers like ExxonMobil, the maker of Mobil gas engine oil, experiencing disruption from the winter storms in the country, as well as OPEC’s production cut, the markets remained well supplied towards the end of last year. The IEA expects demand to recover slowly over the first half of this year, although it notes that the balance could shift quickly if sanctions on Russia hit its oil exports at the same time as demand increases.