China and Russia will be key factors in this year's oil market

The International Energy Agency (IEA) stated in its monthly report that the growth in oil demand, mostly driven by the reopening of China, could generate a problem in supply, affected by Russia's lower production as a consequence of the sanctions and the embargo resolved by Washington and its NATO allies.

The IEA projects that oil demand will grow by 1.9 million barrels per day, reaching 101.7 million barrels per day, an all-time record. This increase in demand, almost half of which is explained by China, "will put pressure on balances, given that Russian supply will slow down due to the impact of sanctions", the report points out.

In any case, the agency is cautious and indicates that "the magnitude and speed" of the reopening of the Asian country, the world's largest crude oil consumer, are uncertain. For the moment, for the first three months of the year, world supply will exceed consumption by almost 1 million barrels per day, and the substantial growth in demand will only come in the second quarter.

In the immediate term, the IEA report points out that the greatest demand comes from jet fuel as a result of the upturn in international tourism. In terms of geographical origin, the document specifies a drop of 900,000 barrels per day in the last quarter of 2022 in the countries of the Organization for Economic Cooperation and Development (OECD) due to the weakening of their industries, while outside the bloc, demand rose by 500,000 barrels per day.

Regarding supply, the IEA estimates that it will grow less than demand throughout the year, with a forecast increase of one million barrels per day. Production by countries that are not members of the Organization of the Petroleum Exporting Countries and their allies (OPEC+) is expected to grow by 1.9 million barrels per day, led by the United States, Canada, Brazil and Guyana.

On the other hand, the production of the countries of the oil cartel would decrease by 870,000 barrels due to the expected drop in Russia's production. Last December alone, its supply fell by 200,000 barrels compared to November, due to the embargo imposed by the European Union and the ceiling on its purchase price established by the G7 countries.

Despite the new record in demand and supply, the international agency highlighted the advances in energy efficiency and the "boom" in electric car sales, which prevented demand from increasing by 900,000 barrels per day. "Measures such as this are especially vital in an oil market constrained in demand," the report states.

Regarding Russia's situation, the lower exports together with the low price of Urals oil - where the barrel was worth US$ 40 per barrel - caused Moscow's revenues to fall by US$ 3 billion to US$ 12.6 billion. Despite the drop in its exports, Russia exported a record 1.2 million barrels per day of diesel in December.

"Oil savings and the use of government reserves showed their usefulness in managing market risks during the energy crisis triggered by the Russian invasion of Ukraine," the IEA analyzed the sector's situation during 2022.

"We are cautiously optimistic," OPEC Secretary General Haitham Al-Ghais said about the oil sector's outlook for this year in an interview granted to the financial news agency Bloomberg and disseminated by the World Economic Forum organization taking place in the Alpine town of Davos, Switzerland.

According to Al-Ghais, the growth of demand in Asia, and particularly in China, would make it possible to offset the slowdown in the rest of the global economy. This assessment coincides with that made by Amin Nasser, CEO of Aramco, the world's largest oil company, originally from Saudi Arabia. "We are very optimistic in terms of a return of demand. We are starting to see good signs from China," Nasser said in Davos.

According to Nasser, the world needs between 4 to 6 million barrels per day of new production to compensate for the natural decline in existing fields. In this context of lower production and increased demand, some Wall Street banks such as Goldman Sachs forecast a barrel of crude oil exceeding US$ 100 for the second half of the year.