Demand for oil is likely to hit new heights this year, after consumption of the fossil fuel reached a record high in June, according to the International Energy Agency (IEA).
The IEA’s latest oil market report published on Friday notes that oil demand hit a record 103 million barrels a day in June, driven by better-than-expected economic growth in rich nations, summer air travel and surging demand for the fossil fuel in China, particularly for petrochemical production.
And, as a result, the influential organization said it now expects global oil demand to hit an average of 102.2 million barrels a day in 2023, which would be the highest-ever annual level.
China alone, where COVID-19 restrictions have finally begun to be eased over the past year, is set to account for 70 percent of the growth in expected oil demand in 2023, it said.
However, while oil demand is still rising, growth is set to slow down next year as the clean energy transition gathers pace and the global economic recovery from the pandemic peters out, the IEA stressed.
It predicted factors such as tighter energy efficiency standards and the ongoing rise of electric vehicles would serve to more than halve oil demand growth from 2.2 million barrels a day in 2023 to 1 million barrels a day next year.
“With the post-pandemic recovery having largely run its course and as the energy transition gathers pace, growth will slow to one million barrel a day in 2024,” it said.
The IEA’s findings echo recent predictions made by energy analyst Wood Mackenzie, which contended in a report published in July that oil demand would continue to grow throughout the 2020s, before peaking in the 2030s when electric vehicles (EVs) begin to significantly eat away at fossil fuel demand. The analyst predicted that while the rate of growth in demand will start to slow from 2024 onwards, consumption will not fall until next decade.
Elsewhere in its oil market update, the IEA noted that global stockpiles of oil are thinning after Saudi Arabia and Russia have made cuts in supply, in a move designed to shore up prices for the fossil fuel. The oil report predicts that output from OPEC+ countries could fall to a two-year low in 2023.
Supply from countries that sit outside the OPEC+ bloc is expected to dominate world supply growth next year, it predicts, with the U.S. expected to make up 80 per cent of global 2023 supply growth, or 1.2 million barrels a day.