Expecting a Bounce in Oil Demand in 2023, Led by China's Petrochemical Industry
Diving into the world of energy, the International Energy Agency (IEA) has signaled a forecast increase in global oil demand for this year. According to their monthly report, the agency explains, "Global demand for oil continues to exceed expectations." The organization, headquartered in Paris, slightly raised its estimates for 2023, primarily due to the high demand for petrochemicals within China's industrial sector.
China's thriving petrochemical industry, which manufactures chemical goods like plastics, is the major influencer behind this estimated surge. This sector's demand for oil is striking a new high, with China's oil intake reaching a mind-boggling 17.1 million barrels per day in September this year. On a global scale, the yearly average is predicted to climb up to an impressive 102 million barrels per day in 2023 - a noteworthy rise of 2.4 million barrels compared to the previous year.
However, the projected growth for 2024 is expected to decrease by 930,000 barrels per day to 102.9 million barrels. This anticipated decrease is partially due to economic sluggishness in several Western nations and the ongoing energy transition.
On a global scale, the British climate change specialist website, Carbon Brief, also spots a similar trend. The experts believe that CO2 emissions in China will likely dip in the upcoming year, mainly owing to the rapid expansion of renewable energies in China. As the world's largest greenhouse gas emitter, China is currently leading the charge in emitting harmful emissions.
Specialist Lauri Myllyvirta from the Centre for Research on Energy and Clean Air writes on Carbon Brief that the solar energy capacity added in China this year is almost twice as much as the total capacity installed in the United States. "New solar, wind, hydro, and nuclear capacity installed in 2023 alone is estimated to generate 423 terawatt-hours (TWh) per year, equivalent to France's entire electricity consumption," Myllyvirta explains.
As a result of this shift towards renewables, CO2 emissions from fossil power production are anticipated to decrease significantly in the upcoming year. Based on official data from China and reputable companies, the report appears solid.
To sum up, the IEA attributes the slight increase in their 2023 oil demand forecast to the high demand for petrochemicals from China, despite the anticipated decline in demand growth for 2024 due to economic weakness in Western countries and the ongoing energy transition.
Insights from Enrichment Data
- Lower Fuel Prices: Lower fuel prices have made oil more affordable, leading to increased consumption.
- Colder Weather: The colder weather in the Northern Hemisphere, particularly in regions like Canada, the US, Europe, Russia, China, and Japan, has boosted oil demand due to higher heating degree days.
- Abundant Petrochemical Feedstocks: The availability of petrochemical feedstocks has also contributed to the rise in oil demand.
On the other hand, despite China's significant role in global oil demand growth, its demand for oil is expected to slow down. Factors such as the increasing adoption of electric vehicles and electrification of transport in China are contributing to a decline in transport oil use. If Chinese oil demand continues to level off or decline, it could affect the overall global demand growth projections.
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