Oil demand in China is growing faster than expected, which could further tighten the market and push prices higher, according to the International Energy Agency (IEA).
Earlier this week, the IEA released a report on the global oil market, in which it continued to raise its demand forecast, to a record 102 million barrels a day this year, up 2.2 million barrels from last year.
China accounted for the majority of the increase, up 60%. Its crude oil consumption also hit a record high of 16 million barrels a day in March.
While the latest economic data suggests China's recovery is fragile, the IEA said "the outlook for oil demand recovery remains in line with expectations." China is now the world's top oil consumer.
Beijing has been ramping up imports of Russian oil as it seeks to revive its economy after years of zero-Covid policies. It needs cheap energy to power its massive manufacturing industry.
Oil tankers dock at a port in Zhejiang (China) in January. Photo: Reuters
The IEA report, which is released monthly and is closely watched by the market, this time points to a growing gap between demand for crude in developing countries and Europe and North America, where the economic outlook is less bright.
Demand is expected to boom in China and other developing countries. Conversely, high interest rates and rampant inflation in developed economies could dent demand there.
Western efforts to wean themselves off fossil fuels are widening the gap, while developing countries still rely on oil and coal as affordable fuels.
As demand is forecast to rise, supply is struggling to keep up. Global oil supplies are forecast to average more than 101 million barrels a day this year, up 1.2 million barrels from last year.
The Organization of the Petroleum Exporting Countries (OPEC) began cutting production by more than a million barrels a day this month, and US oil companies are also reluctant to invest in new production.
However, despite the IEA’s forecast of a tight oil market, crude oil prices are still on a downward trend. Concerns about the health of the US banking system are the latest issue affecting the global economic outlook, putting pressure on crude oil prices.
Ha Thu (according to WSJ)
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