Global oil demand has surged to a record amid robust consumption in China and elsewhere, threatening to push prices higher, the International Energy Agency said.
Global fuel consumption averaged 103 million barrels per day for the first time in June and could rise further in August, the agency said in a report. As Saudi Arabia and its partners tighten supplies, oil markets are tightening significantly.
“Oil demand is rising to record highs, driven by strong summer air travel, increased use of oil in power generation and increased Chinese petrochemical activity,” said IEA based in Paris. “Crude and product inventories have risen sharply” and “balances are expected to tighten further in the fall.”
Oil hit a six-month high above $88 a barrel in London this week amid a resurgence in fuel use and post-pandemic supply curbs by the Saudi-led OPEC+ alliance . Brent futures fell slightly to trade below $87 on Friday.
The slump in global oil demand during the Covid-19 crisis three years ago spurred speculation that consumption could be nearing a peak as remote work gained popularity and governments tried move away from fossil fuels to avoid catastrophic climate change.
But the IEA data shows that despite growing evidence of a warming planet shown by this summer’s heat waves and wildfires in the Northern Hemisphere, oil use is stronger than never China will account for 70% of this year’s demand growth, but surprisingly resilient developed nations have added to the latest surge.
Energy change
The energy transition looks set to have an impact next year, when global demand growth will roughly halve to 1 million barrels a day due to improved vehicle efficiency and the adoption of electric cars, the IEA said.
But in the meantime, global markets are tightening, leaving oil inventories in developed countries about 115 million barrels below their five-year average, the report said. Global stocks will run down by 1.7 million barrels a day in the second half of the year, with preliminary data appearing to confirm declines in July and August, the IEA said.
Major consumer nations have criticized the Saudis and their OPEC+ allies for curbing supplies, warning that a further rise in inflation would squeeze consumers and jeopardize the global recovery. However, Riyadh has said it could deepen the current cuts if necessary.
Production from the Organization of the Petroleum Exporting Countries and its partners sank last month to near a two-year low as the Saudis implemented a unilateral cut of 1 million barrels a day. Coalition member Russia is also cutting exports.
OPEC’s need for crude in the fourth quarter looks a little less pressing compared to last month’s report, as a slightly weaker demand outlook for the period and some additional supply elsewhere reduce OPEC’s production requirement of 400,000 barrels per day.
However, an average of 29.8 million barrels a day was needed from the 13 cartel members between October and December, far more than the 27.9 million a day they pumped in July, according to the IEA.
“If the bloc’s current targets are maintained, oil inventories could fall” significantly, the agency warned, “with the risk of further price increases.”
