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Global oil demand is set to rise to an all-time high in 2023 after China relaxed its Covid-19 restrictions in a move that could drive crude prices higher in the second half of the year, according to the International Energy Agency.
“Two wild cards dominate the 2023 oil market outlook: Russia and China,” the IEA said in its first monthly oil report of the year. “This year could see oil demand rise by 1.9mn b/d to reach 101.7mn b/d, the highest ever, tightening the balances as Russian supply slows under the full impact of sanctions.”
Russian oil supply had “held steady” in December at 11.2mn b/d despite EU sanctions.
However, the Paris-based IEA forecast that the “well-supplied” global oil market at the start of the year could “quickly tighten” as the western sanctions — particularly an EU ban on the import of refined Russian products from February 5 — took full effect.
The IEA said nearly half of the forecast rise in oil consumption this year would come from China even though “the shape and speed” of China’s reopening remained uncertain.
Beijing’s Covid-19 restrictions, which depressed economic activity last year, meant that Chinese oil demand in 2022 fell for the first time since 1990, declining by an average of 390,000 b/d, its biggest ever annual decline.
But the loosening of quarantine and testing measures in November, followed by Beijing’s abrupt decision to abandon its zero-Covid regime in early December, had already boosted Chinese consumption, the IEA said. Chinese oil demand in November rose by 470,000 b/d compared with October, according to IEA data