IEA raises 2023 oil demand growth estimate by 100,000 b/d on 'resurgent' China

• 2023 supply growth estimate raised to 1.2 million b/d, led by non-OPEC+
• Record-high output expected from US, Brazil, Norway, Canada, Guyana

The International Energy Agency has raised its estimate of global oil demand growth for this year by 100,000 b/d to 2 million b/d on the back of a "resurgent" China and an aviation recovery.

In its latest monthly oil market report published Feb. 15, the IEA raised its demand growth estimate for 2023 for the third month in a row, noting a more optimistic tone to markets.

It raised the estimated "call" on OPEC crude oil -- or requirement for OPEC crude -- for the first quarter by 200,000 b/d to 28.4 million b/d, and for the second quarter by 100,000 b/d to 29.3 million b/d.

North Sea benchmark Dated Brent, assessed by Platts, part of S&P Global Commodity Insights, averaged $82.8/b in January, up $1.7/b on the month. "The risk-averse climate of recent months subsided on optimism that China's reopening would bolster global growth. Adding to the more upbeat mood was a distinct improvement in Europe's economic outlook, buttressed by the spectacular slump in natural gas prices," the IEA said, adding that a weaker US dollar had provided an additional tailwind for oil.

On the supply side, the IEA raised its supply growth estimate for the year by 200,000 b/d to 1.2 million b/d, saying the increase would come from outside the OPEC+ producer countries. It forecast record-high production would come from the US, Brazil, Norway, Canada and Guyana.

Russian resilience

On Russia, the IEA said the country's oil exports had risen by 300,000 b/d in January to 8.2 million b/d, close to an all-time high reached in February 2020, with crude accounting for the increase and product exports holding steady. This came despite an EU ban on imports of Russian crude.

Russian oil exports to the EU were down two-thirds from pre-war levels at 1.3 million b/d, the IEA estimated. However, Russian crude exports to China rose by 300,000 b/d to 2.1 million b/d in January, their highest level on record, the IEA said.

A price cap mechanism imposed by G7 countries had helped reroute Russian supplies, with Russian oil production down by 160,000 b/d from pre-war levels in January, it added.

"Moscow, for now, has successfully re-routed shipments of crude to Asia and the G7 price cap on crude oil appears to be helping to keep the barrels flowing," it said, adding that a Feb. 10 announcement of a 500,000 b/d Russian production cut may signal Moscow is "struggling to place some of its barrels."

On inventories, "observed" global stock levels fell by 69.8 million barrels in December, but were up 40.5 million barrels from a year earlier, the IEA said.

In terms of the OECD, industry stock levels were down by 18.1 million barrels in December at 2.77 billion barrels, 95.7 million barrels below the five-year average, with preliminary data for the US, Europe and Japan suggesting a build in January of 28 million barrels, the IEA said.