Oil demand could exceed supply next year, says IEA – Copyright GETTY IMAGES NORTH AMERICA/AFP/File David Ryder
High oil prices have yet to dampen demand, which is expected to continue to rise and could soon outstrip supply, the International Energy Agency warned on Wednesday.
He warned that the global economic recovery could be derailed unless governments take action to reduce fuel consumption and prices that threaten the stability of some countries.
“Without strong policy intervention on energy consumption, risks remain high that the global economy is on track for recovery,” said the Paris-based agency which advises industrialized countries on energy policy in its latest monthly oil market report.
Oil prices have risen from around $80 a barrel earlier this year to over $120 at times as Russia’s invasion of Ukraine raised supply concerns and the reopening of China’s economy following the Covid lockdowns has boosted demand.
While high oil prices have started to weigh on demand in industrialized countries, the IEA said this has been offset by stronger-than-expected rebounds in demand from China and some emerging and developing countries.
The IEA now expects oil demand to increase this year to 99.2 million barrels per day (mbd) and 101.3 mbd next year.
Meanwhile, supply climbs to 100.1 mbd this year. But even if it reaches an expected record of 101.1 mbd next year, it will fall below demand.
The IEA noted that the world has little spare capacity to increase production, with the combined buffer of Saudi Arabia and the United Arab Emirates expected to fall to just 2.2 mbd in August.
He said output from OPEC+ countries could even fall next year if supply from Russia is affected as expected by tightening international sanctions.
Combined with tight refining margins causing imbalances in some product markets and putting upward pressure on prices, “it may be up to demand-side measures to reduce fuel consumption and costs that pose a threat for stability, especially in emerging markets,” the IEA said. said.
He added that the strengthening of the dollar against other currencies as the US Federal Reserve raised interest rates has compounded the pain of already rising food and oil import costs for many developing countries and emerging countries, including Sri Lanka which has been plagued by social unrest.