IEA expects a shortage of supply in the oil market

The International Energy Agency said on Thursday that oil demand will rise to a record level this year as supply tightens, but in light of adverse economic conditions and interest rate hikes, the increase will be slightly smaller than expected.

However, the Paris-based agency expects demand growth next year to increase more than expected, although the increase will be less than half of this year’s increase.

It stated in its monthly report on oil that “the global demand for oil is under pressure from the difficult economic environment resulting from reasons including monetary tightening in particular in many developed and developing countries.”

Despite expectations of demand reaching 102.1 million bpd, the agency cut its growth forecast for the first time this year by 220,000 bpd to 2.2 million bpd.

The agency expected a lack of supply in the oil market, with the volume of demand exceeding supplies for the rest of 2023.

The agency added that it expects more than two-thirds of demand growth this year to come from China, where the pace of economic recovery is set to increase after the pandemic, especially later this year.

But China’s recovery has been taking off slowly so far.

“The widely expected reopening in China has failed to extend to sectors other than travel and services, as the economic recovery loses momentum after picking up earlier in the year,” the agency said.

She said that demand in developed countries, especially Europe, remains weak with declining manufacturing activity. The developed countries, members of the Organization for Economic Co-operation and Development, are heading to record a contraction in demand for four consecutive quarters until the last quarter of 2023.

And the agency added, saying that the growth in oil demand is heading to decline by the next half of the year to 1.1 million barrels per day, which reflects the tendency to manufacture electric cars and rationalize energy, although the agency raised its estimates with an increase of 860 thousand barrels per day, which it expected last month.

The agency said that the strong outlook for the global economy in the coming year and an expected increase in the use of gas oil in China helped to raise expectations.