IEA raises oil demand forecast due to opening up of China

The International Energy Agency (IEA) has sharply raised its forecast for global crude oil demand because of the prospect of stronger economic growth in China.

In the first three months of the year, demand should be 500,000 industry-standard barrels – each containing 159 litres – per day higher than previously assumed, according to the monthly report of the association of leading industrialized countries published in Paris on Wednesday.

For the whole year, the IEA expects an increase of 2 million barrels per day to an average of 101.9 million barrels per day.

In the report the IEA points to the end of the coronavirus measures in China which had weighed heavily on the world’s second-largest economy last year and slowed demand for crude oil.

China’s opening up should provide a “welcome boost to the entire global economy,” the report says, adding that the country is “poised to resume its established role as the primary driver of global oil demand growth.”

Despite arguably growing demand in China, the IEA believes there will be too much supply in the global crude market in the first half of the year.

Even Russia’s 500,000 barrels per day cut in production from March, which was announced in response to Western sanctions, will not  prevent the oversupply on the world market, the report found.