World oil demand is forecast to reach 101.6 million barrels a day in 2023, with growth accelerating from 1.8 mb/d in 2022 to 2.2 mb/d in 2023, the IEA reports.
In contrast to 2022 when OECD countries led the expansion, non-OECD economies are set to account for nearly 80% of growth next year. Led by the United States, oil producers outside of the OPEC+ group, are set to lead world supply growth through next year, adding 1.9 mb/d in 2022 and 1.8 mb/d in 2023.
The IEA finds that the oil market may find a balance in the second half of this year as higher prices temper demand and production grows, that the relief may prove to be short-lived. That could point to continued pressure on crude and product prices.
World oil demand is forecast to reach 101.6 mb/d in 2023, surpassing pre-pandemic levels. While higher prices and a weaker economic outlook are moderating consumption increases, a resurgent China will drive gains next year, with growth accelerating from 1.8 mb/d in 2022 to 2.2 mb/d in 2023. In contrast to 2022 when the OECD led the expansion, non-OECD economies are set to account for nearly 80% of growth next year.
Non-OPEC+ is set to lead world supply growth through next year, adding 1.9 mb/d in 2022 and 1.8 mb/d in 2023. As for OPEC+, total oil output in 2023 may fall as embargoes and sanctions shut in Russian volumes and producers outside the Middle East suffer further declines. Assuming Libya rebounds from a steep drop, the bloc’s production could increase 2.6 mb/d this year, eroding its spare capacity cushion.
Global refining capacity is set to expand by 1 mb/d in 2022 and 1.6 mb/d in 2023, boosting throughputs by 2.3 mb/d and 1.9 mb/d, respectively. Nevertheless, product markets are expected to remain tight, with a particular concern for diesel and kerosene supplies. While diesel cracks eased month-on-month in May, both jet fuel and gasoline cracks surged as demand picked up seasonally.
Following nearly two years of declines, observed global oil inventories increased by 77 mb in April. OECD industry stocks also rose, by 42.5 mb (1.42 mb/d), helped by government stock releases of nearly 1 mb/d. At 2 669 mb, OECD industry stocks were nevertheless 290.3 mb below the 2017-2021 average. Preliminary data for May show total OECD stocks building by 6 mb.
Despite economic headwinds, steady demand for light sweet crude in a tight physical market is boosting marker grade prices as they are in the same crude quality family. Since 6 June, WTI and Brent futures have averaged over $120/bbl. North Sea Dated hit $127.9/bbl on 13 June.
After seven consecutive quarters of hefty inventory draws, slowing demand growth and a rise in world oil supply through the end of the year should help world oil markets rebalance. Higher oil prices and a weaker economic outlook continue to temper our oil demand growth expectations. But in 2023, a resurgent China will boost non-OECD demand growth, offsetting a slowdown in the OECD. Following gains of 1.8 mb/d this year, world oil demand is forecast to expand by 2.2 mb/d to 101.6 mb/d in 2023.