Global oil demand growth is expected to jump by 380,000 barrel per day this year to reach 2.1 million barrels per day, driven by increasing use for power generation and the switch from gas, a report by International Energy Agency has found.
It is up from the IEA's earlier forecast of 1.8 million bpd in June.
The agency, with headquarters in Paris, predicted that total world oil demand will reach 99.7 million bpd in 2022 and surpass pre-Covid levels at 101.8 million bpd next year.
World oil supply is set to rise by a further 1 million bpd by year-end, it said.
The gains mask “relative weakness” in other sectors and a slowdown in growth from 5.1 million bpd at the start of the year to less than 100,000 bpd by the fourth quarter, the agency said in this month's oil market report.
“With several regions experiencing blazing heatwaves, the latest data confirm increased oil burn in power generation, especially in Europe and the Middle East but also across Asia,” IEA said in its report.
“Fuel switching is also taking place in European industry, including refining … at the same time, natural gas and electricity prices have soared to new records, incentivising gas-to-oil switching in some countries."
World oil supply hit a post-pandemic high of 100.5 million bpd last month, the IEA said.
“Opec+ ramped up total oil production by 530,000 bpd in line with higher targets and non-Opec+ rose by 870,000 bpd,” it said.
The 23-member Opec+ super group of oil producers last week agreed to boost output modestly by 100,000 bpd next month amid a slowdown in the global economy.
Oil prices have remained volatile this year. Brent touched about $140 a barrel in March shortly after Russia’s invasion of Ukraine, now in its sixth month, and the subsequent sanctions imposed by the US and the UK on the import of Moscow’s crude.
However, oil fell in the past few months as concerns grew over the possibility of a looming recession hitting fuel demand globally.
Last month, the International Monetary Fund lowered its growth forecast for the global economy to 3.2 per cent this year, from its previous forecast of 3.6 per cent in April based on factors such as Russia’s war in Ukraine, high inflation and the Covid-19 pandemic.
Benchmark crude oil futures have sunk by around $30 per barrel since a peak in June, as worsening economic prospects and a growth in demand affected sentiment, the IEA said.
Its latest report boosted oil prices slightly on Thursday.
Brent, the global benchmark for two thirds of the world's oil, was trading 0.60 per cent up, at almost $98 per barrel at 3.45pm UAE time on Thursday. West Texas Intermediate, the gauge that tracks US crude, was up 0.63 per cent at $92.51 a barrel.
The IEA also revised up its forecast for Russian oil output but lowered the outlook for North America.
Last month, Russian oil exports fell by 115,000 to 7.4 million bpd, from about 8 million at the start of the year. Its crude and oil product flows to the US, the UK, European Union and Japan have slumped by nearly 2.2 million bpd since the outbreak of the war in Ukraine, of which two thirds have been rerouted to other markets.
Russia’s export revenue fell from $21 billion in June to $19bn last month, on reduced volume and lower oil prices.
However, the rerouting of flows to India, China and other countries, along with seasonally higher Russian domestic demand, has mitigated upstream losses, the IEA said.
By last month Russian oil production was 310,000 bpd below prewar levels, while total exports were down 580,000 bpd.
The EU embargo on Russian crude that comes into full effect in February next year is expected to result in further declines, as nearly 1 million bpd of products and 1.3 million bpd of crude would have to find new homes, the IEA said.
