Neither the prices, skyrocketing, nor the ambition to decarbonize the economy and tackle climate change. World oil consumption will accelerate next year to 101.6 million barrels per day, more than previously forecast and far exceeding pre-pandemic levels. The annual increase in demand will be 2.2 million barrels, compared to 1.8 in 2022, and will be concentrated in emerging countries, according to the projection published this Wednesday by the International Energy Agency (IEA).
“The rise in prices and the worse economic outlook are moderating the growth of consumption, but the resurgence of China will guide the increases in 2023”, explain the technicians of the agency, dependent on the Organization for Economic Cooperation and Development (OECD, the thinktank of rich countries). Unlike in 2022, when rich countries were the ones pushing up demand as pandemic restrictions were lifted, next year it will be low- and middle-income countries that will account for 80% of the increase: from Of the 2.2 million barrels of increase, 1.8 million will come from these economies.
On the supply side, the increase will be largely covered by less traditional producers, with the United States in the lead. With Russian exports penalized by Western sanctions, OPEC+ (the expanded cartel led by Saudi Arabia and Russia itself, in which all the large countries of the Persian Gulf are represented) will add 1.8 million barrels, compared to 1 .9 additional that it put on the market this year. Only an increase in production in Libya – one of the few that has idle capacity – could take that increase to 2.6 million barrels, which would help reduce pressure on prices. This Tuesday, OPEC itself acknowledged having problems fulfilling its promise to reopen the oil tap due to the limited margin for increasing production.
“World oil supply will struggle to keep pace with demand next year,” warns the Agency. “Tighter sanctions are forcing Russia to shut down more wells and several producers are facing capacity constraints.” The EU, he recalls, has just agreed to a partial veto on 90% of oil imports from the Eurasian country in the next six or eight months.
Tension in the markets
Production and demand are just two of the four key variables in the oil market. The third is refining capacity: convert crude oil into fuel. That is where the main bottlenecks have occurred in recent months, which have pushed the price of gasoline and diesel to record highs even though oil is still far from its peak. The IEA’s prospects are not much brighter: global refining capacity will grow by 1.6 million barrels per day in 2023, an increase greater than that of 2022 (one million) but insufficient to alleviate the tension. “The market will continue to be tight, with special concern in the case of diesel and kerosene supply,” warns the Paris-based agency.
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The fourth key variable is storage capacity. And there the news is not the best either: after two years of continued decline in inventories, and despite the increase recorded in April (the last month for which data is available), crude oil and derivatives reserves in rich countries remain clearly below below the average of the last five years (2017-2021), which adds an additional degree of pressure on the general picture of the market.
