Oil Prices: Global demand could reach a record high as China reopens


London
CNN

Global oil demand is expected to reach an all-time high this year on the back of China’s rapid reopening of its economy.

The International Energy Agency said in its latest monthly report released on Wednesday that oil demand could rise by 1.9 million barrels per day to a record high of 101.7 million barrels per day.

“Nearly half of this growth in global demand will be driven by China even as the form and speed of its reopening remains uncertain,” the IEA said.

Beijing began dismantling its strict anti-coronavirus policy in December, paving the way for a pickup in travel, trade and business activity across the world’s second-largest economy. Most economists expect growth to remain sluggish in the first quarter of 2023 before picking up through the rest of the year.

A rebound in Chinese demand could lead to a tighter global oil market due to the “full effect” of Western sanctions on Russian oil. The International Energy Agency said in the report in the report.

The Paris-based agency said oil exports from Russia fell by an average of 200,000 barrels per day in December from the previous month after the European Union imposed an embargo on imports of Moscow’s crude and G7 nations imposed caps on fuel prices. can be traded.

Prices for Brent crude, the global benchmark, fell last year after hitting a 14-year high of $139 a barrel in early March after Russia invaded Ukraine. Prices began to recover in early December, rising 1.7% on Wednesday to $87 a barrel.

It is unclear where prices might go next. The International Energy Agency said there was a “high degree of uncertainty” about its outlook. Despite an expected decrease in supply from Russia, global oil inventories are at their highest levels since October 2021.

The agency said a spurt in demand for electric vehicles and efforts by countries to become more energy efficient could also help ease demand.

“Measures like this are particularly vital in a supply-constrained oil market,” she added.

The IEA’s forecasts come as business leaders express cautious optimism that the world can avoid a recession in 2023, after months of grim predictions about the economic outlook.

Thanks in large part to China, whose reopening is expected to unleash a spending spree that may offset economic weakness in the United States and Europe.

Earlier this month, the International Monetary Fund said that about a third of the global economy is likely to fall this year into recession — usually defined as two or more consecutive quarters of declining growth.

In November, the Organization of the Petroleum Exporting Countries (OPEC) and its allies began cutting their oil production by 2 million barrels per day, a policy set to continue into 2023, as it expects a drop in demand.

— Julia Horowitz contributed reporting.

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