IEA: Russia, China dominate 2023 oil market outlook
Russia and China dominate the oil market outlook for 2023. The International Energy Agency (IEA) forecasts the year could see oil demand rise by 1.9 million b/d to 101.7 million b/d, the highest ever, tightening the balance as Russian supply slows under the full impact of sanctions, IEA said in its January 2023 oil market report. China will drive nearly half the global demand growth even as the shape and speed of its reopening remains uncertain, IEA said. Jet fuel remains the largest source of growth, up 840,000 b/d.
Nevertheless, “energy efficiency gains and booming sales of electrical vehicles will curb global 2023 demand growth by close to 900,000 b/d this year. Measures like these are especially vital in a supply-constrained oil market,” IEA said.
World oil supply growth in 2023 is set to slow to 1 million b/d following last year’s OPEC+ led growth of 4.7 million b/d. An overall non-OPEC+ rise of 1.9 million b/d will be tempered by an OPEC+ drop of 870,000 b/d due to expected declines in Russia. The US ranks as the world’s leading source of supply growth and, along with Canada, Brazil, and Guyana, is expected to hit an annual production record for a second straight year.
Russian oil exports fell by 200,000 b/d month-on-month (m-o-m) in December 2022 to 7.8 million b/d, as crude shipments to the European Union (EU) declined after the EU crude embargo and G7 price cap came into effect. However, Russian diesel exports surged to a multi-year high of 1.2 million b/d, of which 720,000 b/d was destined for the EU. Record discounts for Russian benchmark Urals grade saw Russian revenues slip by $3 billion m-o-m to $12.6 billion.
Global refinery activity was steady in December as US runs fell 910,000 b/d due to weather-related outages, but higher runs in Europe and Asia offset the decline. After an increase of 2.1 million b/d in 2022, refinery throughputs are set to grow by 1.5 million b/d in 2023, helped by 2.2 million b/d of capacity additions between fourth-quarter 2022 and end 2023.
Global observed oil inventories surged by 79.1 million bbl m-o-m in November 2022, hitting their highest levels since October 2021. The increase was led by non-OECD stocks (+43.9 million bbl) and oil on water (+38.1 million bbl). In the OECD, the release of government reserves offset a small increase in industry holdings. At 2,779 million bbl, OECD industry stocks were 37.1 million bbl above a year ago but 125.9 million bbl below their 5-year average.