Global oil demand hits record and may move higher, says International Energy Agency

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Global oil demand has hit a record and may move higher in August, threatening to prolong a recent rally in crude prices, the International Energy Agency said on Friday.

Demand reached an all-time high of 103mn barrels a day in June driven by better than expected economic growth in OECD countries, strong summer air travel and surging oil consumption in China, particularly for petrochemical production, the IEA said in its monthly oil report.

The data on rising global oil consumption shows that global efforts to cut carbon emissions are yet to have a significant impact on oil demand, just as the summer in the northern hemisphere has been rocked by record temperatures and wildfires.

The IEA said demand could hit another peak this month and was on track to average 102.2mn b/d in 2023, the highest ever annual level. It means demand will have risen by 2.2mn b/d over the course of the year, with 70 per cent of the growth coming from China, the IEA said.

Rising demand has pushed oil prices higher in the past month, aided by cuts in supply made by Saudi Arabia and Russia.

Production from Opec+ countries dropped in July to the lowest level since October 2021 after Saudi Arabia, which leads the group, cut its own output by 1mn b/d in a move to shore up prices. It said last week that it would extend the cut into September and could even reduce output further.

The measure, combined with output cuts made by Russia, will plunge Opec+ output in the third quarter to a two-year low, according to the IEA’s forecast.

Brent crude, the international benchmark, was trading at $87 a barrel on Friday, up 10 per cent over the past month, with some analysts predicting a return to $100 a barrel oil this year.

The rallying crude price has already provoked concern in the US, where petrol costs have reached a nine-month high just as President Joe Biden steps up his bid for re-election next year.

Oil demand was expected to rise again in 2024 but at slower rate, the IEA cautioned, as it trimmed its demand growth forecast for 2024 by 150,000 b/d.

“With the post-pandemic recovery having largely run its course and as the energy transition gathers pace, growth will slow to 1 mb/d in 2024,” it said.

The growth would be driven by China again, with 60 per cent of the additional demand coming from the country, it added.