Demand for Oil Reaches Record High, Boosted by Air Travel Surge
According to a new report from the International Energy Agency (IEA), demand for oil is reaching record highs, driven by a surge in air travel this summer and increased oil use in power generation. In June, demand reached an all-time high of 103 million barrels per day (bpd), and it is predicted to rise even further this month. This is a significant rebound for the oil industry, as consumption expanded in the April to June period after two consecutive quarters of contraction.
The IEA estimates that global demand for crude will expand by 2.2 million bpd to 102.2 million bpd this year, with China accounting for more than 70% of that growth. This is despite concerns over China’s post-COVID recovery, as it remains the world’s top crude importer. However, the report highlights that OPEC+ production cuts may impact inventories later this year, further boosting prices. Should the output reductions remain in place, the IEA predicts that inventories could draw by 2.2 million bpd in the third quarter and 1.2 million bpd in the final three months of 2023.
The IEA also noted that demand growth is expected to slow to 1 million bpd next year, primarily due to lackluster economic conditions as the initial wave of post-pandemic activity subsides. Additionally, the increasing popularity of electric vehicles and more stringent efficiency standards are likely to weigh on oil demand moving forward.
The tightening market balances projected for the coming months, thanks to extended supply cuts from Saudi Arabia and Russia, indicate further challenges for the oil industry. While the current surge in demand is promising for oil producers, the long-term outlook is uncertain due to various factors affecting oil consumption.
Analyst comment
Positive news: Demand for oil reaches record high, boosted by air travel surge.
As an analyst, the market is expected to react positively to this news with increased demand for oil. However, there may be challenges ahead due to factors such as the increasing popularity of electric vehicles and stricter efficiency standards, which could impact long-term oil consumption. Overall, the market is expected to experience short-term growth but with uncertainties in the future.