Persistent economic headwinds have prompted the International Energy Agency (IEA) to cut its global oil demand growth forecast for the first time this year.
The agency continues to see a record-high global oil demand in 2023, at 102.1 million barrels per day (bpd), its closely-watched Oil Market Report showed on Thursday.
However, the pace of growth in demand was lowered by 220,000 bpd from last month’s projection, the first downward revision to oil demand growth for this year from the IEA.
“Persistent macroeconomic headwinds, apparent in a deepening manufacturing slump, have led us to revise our 2023 growth estimate lower for the first time this year,” the agency said.
Chinese demand growth continues to surprise to the upside, the IEA noted, but demand in developed economies, especially in Europe, has been languishing amid a slowdown in industrial activity. China is expected to account for 70% of the global oil demand growth this year, which is now expected at 2.2 million bpd, down from 2.4 million bpd expected a month ago.
“World oil demand is coming under pressure from the challenging economic environment, not least because of the dramatic tightening of monetary policy in many advanced and developing countries over the past twelve months,” the IEA said.
So far this year, global oil supply has been enough to meet demand. In June, for example, supply was just 70,000 bpd below the levels from last October before the first round of the latest OPEC+ cuts kicked in. A surge in Iranian oil production and recovering output in Kazakhstan and Nigeria ensured a well-supplied market last month, the IEA said.
But with Saudi Arabia’s additional 1 million bpd cut this month and next, supply could tumble and tighten the market, the agency added.
The “ongoing draws in oil on water and deeper supply cuts starting this month suggest the oil market may soon see renewed volatility,” the IEA concluded.
By Tsvetana Paraskova for Oilprice.com
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