Record oil supply this year will not meet demand, with a gradual shift in the balance leading to a notable shortfall in availability by the end of 2023, according to the IEA today.
The Paris-based organisation's monthly Oil Market Report (OMR) projected demand to rise by 1.9mn b/d to 101.7mn b/d this year, an upgrade from its previous forecast for a 1.7mn b/d increase, and supply to increase by 1mn b/d to 101.1mn b/d. These compare with respective forecasts of 101.6mn b/d and 100.8mn b/d made in the December OMR.
The IEA forecast shows supply outstripping demand by nearly 1mn b/d in the current quarter and in the second quarter again marginally, before a flip. Demand in the third and fourth quarters will be 1.6mn b/d and 2.4mn b/d respectively above supply, it said. The IEA cautioned that the timing and pace of a Chinese demand recovery and of Russian supply resilience will affect its forecasts.
The former is "surrounded by even more uncertainty than usual", the IEA said, but it doubts there will be a big upward revision given a "persistently dim macroeconomic outlook" in the country. But China will overtake India to become the leader in oil demand growth, the IEA added, slightly raising its full-year forecast for that to 850,000 b/d.
Around 75pc of the rise in 2023 demand comes from non-OECD regions. Growth in developed regions will be just 470,000 b/d, down from 1.1mn b/d in 2022. The IEA said OECD demand in the final three months of last year fell by 910,000 b/d on the year.
The IEA upgraded its projection for supply growth by 230,000 b/d from its December OMR, fuelled by producing regions outside the Opec+ group. The US, Brazil, Norway, Canada and Guyana will all contribute to a 1.9mn b/d rise in supply from outside the producer alliance. Opec+ supply will fall by 870,000 b/d because of restrictions on Russia. Excluding that country, Opec+ supply will rise by 460,000 b/d.
The IEA called Russia a wild card, noting that production "merely dipped" in December when the EU import ban and G7-led price cap came into force. But it said this will change after the EU bans imports of Russian refined products in early February, when Moscow's apparent move to increase refinery throughput and store "significant amounts" of oil will be challenged.
The IEA forecasts that around 1.6mn b/d of Russian production will be shut in by the end of the first quarter, compared with pre-war levels, and this will reduce output to to 9.7mn b/d in 2023, down by 1.3mn b/d from 2022.
Global stocks rose sharply by 79.1mn bl in November to the highest in 13 months, according to the IEA, buoyed by the amount of oil on the water as Russian exports were diverted further afield. Preliminary December data show a 14.3mn bl decline in stocks.
