World oil demand will reach a record 102.2 million barrels per day (bpd) in 2023, up 2.2 million bpd from last year, the International Energy Agency (IEA) forecast, driven by strong consumption in China and other regions. In June, worldwide fuel usage averaged a record 103 million barrels per day, a record figure, and this demand is expected to surge even further this month. With Saudi Arabia and its allies intentionally reducing supplies, the global oil market is tightening significantly.
IEA attributes the surge in oil demand to factors like robust summer air travel, increased oil usage in power generation and a notable rise in Chinese petrochemical activity. This demand has led to substantial reductions in crude oil and product inventories, creating a tightening market situation that is expected to continue into the autumn.
Despite previous concerns about the plateauing of oil demand due to the pandemic’s impact and global efforts to shift away from fossil fuels for environmental reasons, IEA’s data suggests that oil consumption is stronger than ever. Notably, China is projected to account for around 70% of this year’s demand growth, with developed nations also contributing unexpectedly.
Looking ahead, the energy transition is likely to have more pronounced effects next year, as global demand growth is projected to halve to around 1 million barrels per day due to increased vehicle efficiency and greater adoption of electric cars. In the present moment, however, global oil markets are tightening, leading to inventories in developed nations falling about 115 million barrels below their five-year average. IEA anticipates a substantial depletion of global stockpiles at a rate of 1.7 million barrels per day during the second half of the year.
While some major consuming nations have criticized Saudi Arabia and its OPEC+ allies for constraining supplies and potentially driving inflation, IEA indicates market conditions might push oil inventories even lower, potentially leading to further price increases if current production targets are maintained by OPEC and its partners.
