Oil Demand on Track to Grow to Near 102MM Barrels Per Day

World oil demand remains on track to grow by 2.2 million barrels per day in 2023 to 101.8 million barrels per day, led by resurgent Chinese consumption, jet fuel, and petrochemical feedstocks.

That’s what the International Energy Agency (IEA) noted in its latest oil market report, which was released on Wednesday, adding that, in 2024, naphtha and LPG/ethane, especially in China, “will dominate an overall increase of a more modest 990,000 barrels per day, to 102.8 million barrels per day, reflecting below-trend GDP growth and a structural decline in road transport fuel use in major markets”.

In the report, the IEA stated that an expected rise in global oil demand of 1.5 million barrels per day in the second half of 2023 over first half 2023 levels will eclipse supply by 1.24 million barrels per day.

“Despite its difficult economic situation, China looks on track to account for 75 percent of the increase in world oil demand this year, or 1.6 million barrels per day of the 2.2 million barrel per day total,” the IEA said in the report.

“But global demand growth is set to slow sharply to around one million barrels per day in 2024 as the recovery runs out of steam and with efficiency gains, electric vehicle penetration and working from home further suppressing consumption,” the IEA added.

Refiners are struggling to meet increased demand, especially for distillates, according to the IEA.

“Surging product cracks and refinery margins near all-time highs have failed to spur a meaningful increase in throughputs,” the September oil market report noted.

“Sub-optimal crude allocations following embargoes on Russian crude and products and OPEC+ oil supply cuts have kept European and OECD Asian refinery runs well below year-earlier levels,” it added.

Focusing on production, the IEA said in the report that output curbs by OPEC+ members of more than 2.5 million barrels per day since the start of 2023 have so far been offset by higher supplies from producers outside the alliance.

“Record U.S. and Brazilian supply underpin a 1.9 million barrels per day increase in non-OPEC+ production from January to August, while Iran, still under sanctions, boosted output by around 600,000 barrels per day,” the report stated.

“But from September onwards, the loss of OPEC+ production, led by Saudi Arabia, will drive a significant supply shortfall through the fourth quarter,” it added.

“Unwinding cuts at the start of 2024 would shift the balance to a surplus. However, oil stocks will be at uncomfortably low levels, increasing the risk of another surge in volatility that would be in the interest of neither producers nor consumers, given the fragile economic environment,” the report continued.

According to the IEA report, total OPEC+ supply increased from 42.62 million barrels per day in July to 42.75 million barrels per day in August. The group’s sustainable capacity, which the IEA defines as capacity levels can be reached within 90 days and sustained for an extended period, is 49.41 million barrels per day, the report outlined.

In its previous oil market report, which was released in August, the IEA said “world oil demand is scaling record highs, boosted by strong summer air travel, increased oil use in power generation and surging Chinese petrochemical activity”.

That report projected that global oil demand was set to expand by 2.2 million barrels per day to 102.2 million barrels per day in 2023, “with China accounting for more than 70 percent of growth”.

“With the post-pandemic rebound running out of steam, and as lackluster economic conditions, tighter efficiency standards and new electric vehicles weigh on use, growth is forecast to slow to one million barrels per day in 2024,” the August report said.

Back in its July oil market report, the IEA revealed that global oil demand was projected to climb by 2.2 million barrels per day in 2023 to reach 102.1 million barrels per day, “a new record”.

“However, persistent macroeconomic headwinds, apparent in a deepening manufacturing slump, have led us to revise our 2023 growth estimate lower for the first time this year, by 220,000 barrels per day,” that report stated.

“Buoyed by surging petrochemical use, China will account for 70 percent of global gains, while OECD consumption remains anaemic. Growth will slow to 1.1 million barrels per day in 2024,” the July IEA report added.

In its latest short term energy outlook (STEO), which was released this week, the U.S. Energy Information Administration (EIA) projected that total world consumption of petroleum and other liquids would hit 100.97 million barrels per day in 2023 and 102.33 million barrels per day in 2024.

The STEO predicted that demand would average 101.53 million barrels per day in the third quarter, 101.75 million barrels per day in the fourth quarter, 101.81 million barrels per day in the first quarter of 2024, 101.91 million barrels per day in the second quarter of next year, 102.80 million barrels per day in the third quarter, and 102.78 million barrels per day in the fourth quarter.

Total world consumption came in at 99.16 million barrels per day in 2022, the latest STEO showed.

In its previous STEO, which was released in August, the IEA projected that demand would be 101.19 million barrels per day in 2023 and 102.80 million barrels per day in 2024. That STEO outlined that total world consumption was 99.43 million barrels per day last year.

To contact the author, email andreas.exarheas@rigzone.com