The International Energy Agency (IEA) on Wednesday raised its forecast for oil-demand growth and warned of the potential for another rally in prices on potential disruption to supply.
The IEA increased its projection by 140,000 barrels a day to 2.3 million barrels a day for 2022. It said strong demand for gasoil—a fuel generally used to power industrial machinery—had outweighed weak European and Asian petrochemical deliveries.
For 2023, the IEA lifted its demand growth forecast by 100,000 barrels a day to 1.7 million barrels a day. China is set to be a key driver of demand due to the expected reopening of its economy as it relaxes its Covid-19 restrictions.
Crude oil prices rose on Wednesday.
West Texas Intermediate,
the U.S. benchmark, climbed 1% to $76.16 a barrel.
the international standard, gained 1% to $81.47 a barrel.
Prices remain well below the peaks reached when Russia’s invasion of Ukraine sent prices soaring despite lower OPEC+ production and a European Union embargo on Russian crude oil coming into force.
“As we move through the winter months and towards a tighter oil balance in 2Q23, another price rally cannot be ruled out,” the IEA said in its report.
The IEA predicted that Russia’s oil output will fall by 1.4 million barrels a day next year. Analysts at Raymond James said in a research note that Russia’s willingness to unilaterally reduce production might be underappreciated, noting the country has in recent years cut production by as much as two million barrels a day without significant longer-term harm to industry.
Write to Adam Clark at email@example.com