Global crude oil demand will rebound to pre-pandemic levels and exceed them, clocking in at 100.6 million barrels daily by the end of next year, the International Energy Agency said in its latest monthly Oil Market Report.
This, however, will only happen “in the absence of further policy changes.”
This year, demand will grow by some 5.4 million bpd, the agency said, which next year will slow down to 3.1 million bpd.
Supply will also increase, the IEA said, with non-OPEC production growing by 1.6 million bpd next year, driven by the United States. U.S. oil production is expected to rise by over 900,000 bpd next year.
“That leaves room for OPEC+ to boost crude oil production by 1.4 Mb/d above its July 2021-March 2022 target to meet demand growth,” the IEA said.
This should not be a problem for the cartel, the authority noted. Even after the group boosts output by 2 million bpd starting next month per its production control agreement, it would still leave members with a combined spare capacity of 6.9 million bpd.
The IEA earlier this year saw oil demand taking longer than a year to rebound to pre-pandemic levels. But earlier this month, its executive director Fatih Birol told Bloomberg that demand was recovering faster than previously expected. So unless OPEC+ puts additional barrels on the market on top of the plans to restore 2 million barrels per day by July, oil prices will head higher as the gap widens.
At the same time, the IEA noted in its monthly report that this forecast presents a challenge for the goals it outlined in its Net Zero by 2050 roadmap, released in May.
This roadmap notes that most pledges by countries are not yet underpinned by near term policies and measures,” the agency said. “In the meantime, oil demand looks set to continue to rise, underlining the enormous effort required to get on track to reach stated ambitions.”