Global oil demand is expected to grow by 380,000 bbl/d this year to reach 2.1 MMbbl/d, driven by increasing use for power generation and the switch from gas to oil, according to a new report by Paris-headquartered International Energy Agency (IEA).
“Natural gas and electricity prices have soared to new records, incentivizing gas-to-oil switching in some countries,” the IEA said in its monthly report released Thursday. “With several regions experiencing blazing heatwaves, the latest data confirm increased oil burn in power generation, especially in Europe and the Middle East.”
Despite increased demand, the IEA believes the oil markets will not be undersupplied with stockpiles projected to increase at a rate of 900,000 bbl/d for the remainder of this year.
However, the organization expressed doubts over additional oil supply from OPEC+ due to limited spare capacity.
“Comparatively low levels of operational spare production capacity, held mainly by Saudi Arabia and the United Arab Emirates, may thus all but rule out substantial further OPEC+ output increases in the coming months,” the IEA said in its monthly report on Thursday.
OPEC trims oil demand forecast
On the other hand, OPEC+ trimmed its demand forecast in its closely watched monthly report.
OPEC now expects demand growth of 3.1 MMbbl/d, down by 300,000 b/d from its previous-month estimate, citing “expectations of a resurgence of Covid-19 restrictions and ongoing political uncertainties” in the second half of 2022.
In an unexpected move, OPEC+ in its August 3 meeting, pledged to add only 100,000 barrels a day in September, despite calls from US President Joe Biden to pump more during a visit to group leader Saudi Arabia last month.
The alliance explained the move by saying it had to deploy “severely limited” spare production capacity with “great caution.”
For the next three months, OPEC+ reduced forecasts for global oil demand by 720,000 bbl/d, and boosted projections for non-OPEC supply by 520,000 barrels a day. It expects consumption to average 99.93 million barrels a day in this quarter.
