The International Energy Agency (IEA) and producer group OPEC are sticking to bullish forecasts for world oil demand growth in 2023, largely led by Asia.
But the reality of actual crude imports by the world’s consumer region tells a somewhat different story.
The IEA raised its forecast for crude oil demand growth in 2023 by 100,000 barrels per day (bpd) to 2.4 million bpd in its latest monthly oil market report, released on Nov. 14.
The higher forecast took the view of the group representing major importers closer to that of the Organization of the Petroleum Exporting Countries (OPEC), which in a Nov. 13 report lifted its 2023 demand forecast to a rise of 2.46 million bpd, up 20,000 bpd from its prior release.
Both the IEA and OPEC give an outsized role to China in their demand growth scenarios, with the IEA forecasting the world’s biggest oil importer will see demand lift by 1.8 million bpd in 2023.
While there is a difference between a country’s overall demand and its level of imports, there is a substantial gap between the IEA forecast for demand growth and the increase in imports so far in 2023.
Official customs data shows China’s imports were 11.36 million bpd in the first 10 months of the year, up 1.43 million bpd from 9.93 million over the same period in 2022.
For the whole of 2022, China’s imports were 10.17 million bpd, or just 1.21 million bpd less than the pace of the first 10 months of 2023.
It’s not that domestic crude output has risen substantially either, with official data showing production in the first 10 months was equivalent to 4.18 million bpd, a gain of 1.7% on the same period last year.
China’s demand growth could also be met by drawing on stockpiles, but this hasn’t happened either, with China adding to inventories in the first 10 months of the year.
China doesn’t disclose the volumes of crude flowing into or out of strategic and commercial stockpiles, but an estimate can be made by deducting the amount of crude processed from the total of crude available from imports and domestic output.
The total volume of crude available to refiners from imports and domestic output in the first 10 months of 2023 was 15.54 million bpd, but refinery processing was 14.86 million bpd, meaning that 680,000 bpd was added to storage tanks.
Overall, it appears that the IEA’s forecast for China’s demand growth is far above its increase in actual crude oil imports, and the gap cannot be explained by changes in domestic output or inventories.
OPEC’s estimate of China’s demand growth in 2023 of 1.14 million bpd appears to be far more accurate and likely to eventuate.
MIXED ASIA PICTURE
Outside of China, the rest of Asia presents a somewhat mixed picture, but overall oil imports haven’t shown massive growth so far in 2023.
Asia’s crude imports in the first 10 months of the year were 26.93 million bpd, according to LSEG data, up 1.34 million bpd on the 25.59 million bpd recorded for the whole of 2022.
India, the second-biggest crude importer in Asia, saw arrivals of 4.62 million bpd in the first 10 months of the year, according to LSEG, up 462,000 bpd on the 4.14 million bpd for 2022.
It’s clear that China and India have shown fairly strong growth in oil imports in the first 10 months of the year, but the rest of Asia has seen arrivals decline, making the continent’s overall increase relatively modest and nowhere near enough to meet the IEA and OPEC forecasts.
So, if Asia isn’t importing enough crude to meet the bullish forecasts, is it likely that other regions can?
Demand growth is likely to be negative in Europe, modestly higher in North America and Africa, and slightly stronger in South America, according to the OPEC report.
Where OPEC sees strength, in addition to China and India, is in demand growth in the Middle East, where it is forecasting a gain of 340,000 bpd in 2023 from 2022.
Assuming OPEC is correct in this forecast, the question for the market is whether robust demand growth in the Middle East matters for global oil prices or whether is it a case of countries in the region consuming their own crude rather than exporting it.
Overall, what the global crude market must work out is whether demand forecasts are more important in setting price levels than actual imports by consuming nations.
Source: Hellenic Shipping News
