IEA Cuts Oil Demand Forecast As China’s COVID Crisis Continues

By Tsvetana Paraskova of OilPrice.com

Global oil demand is set to grow by 2 million barrels per day (bpd) this year, the International Energy Agency (IEA) said on Wednesday, revising down its growth estimate by 110,000 bpd from last month as it expects China’s oil demand to fall for the first time in more than three decades.  

“Growth in global oil demand continues to decelerate, weighed down by renewed Chinese lockdowns and an ongoing slowdown in the OECD,” the Paris-based agency said in its closely-watched Oil Market Report on Wednesday.  

The slowdown in China will be partly offset by “large-scale switching from gas to oil,” which is estimated to average 700,000 bpd in the fourth quarter of 2022 and the first quarter of 2023, double the level from a year ago, according to the IEA.  

Oil demand in China is expected to fall by 2.7%, or by 420,000 bpd, this year compared to last year, per IEA estimates. If the estimates are correct, this could be the first yearly decline in Chinese oil demand since 1990 and only the second such drop in IEA records since 1984.

The IEA’s new estimate is now in line with several analyst forecasts that anticipate sudden Covid lockdowns will weigh on China’s oil demand this year as people avoid mass travel around holidays, dragging fuel consumption in the world’s top crude importer down for 2022 for the first time in two decades.

Elsewhere in the IEA report today, figures show still very resilient Russian oil exports. Russian total oil exports actually rose by 220,000 bpd in August to 7.6 million bpd, which is down by just 390,000 bpd from pre-war levels. Estimated export revenues for Russia fell by $1.2 billion from July to $17.7 billion in August.

However, the EU embargo on Russian crude oil and product imports that comes into effect in December 2022 and February 2023, respectively, is expected to result in deeper declines as an additional 1 million bpd of products and 1.4 million bpd of crude will have to find new homes, the IEA said.