The International Energy Agency has lowered its outlook for oil demand growth over the next two years, citing a negative impact from soaring prices and fears of a potential economic slowdown.
In its latest oil market report, the IEA said it now predicts oil demand will increase by 1.7M barrels per day in 2022 to 99.2M b/d. The organization had previously expected the number to rise by 1.8M b/d.
In 2023, the IEA now sees demand jumping a further 2.1M b/d - down from 2.2M b/d estimated last month.
The group warned market sentiment is being weighed down by concerns that central bank actions to curb spiking inflation will instead spark a recession. However, the IEA said this pessimism has been partially offset by strong power generation use and a comeback in oil demand in China.
Meanwhile, the IEA added that risks to the world oil supply persist. Global supply growth in 2022 is now seen moving slightly higher by 1.8M b/d, according to the IEA, but short-term strains could come from maintenance issues at a key pipeline in Kazakhstan and political tensions in Libya.
"Rarely has the outlook for oil markets been more uncertain," the IEA said in a statement on Wednesday.
The organization also flagged that global oil inventories remain "critically low," putting the spotlight on spare supplies held by Saudi Arabia and the UAE. The IEA called for "strong policy intervention" from governments to help maintain spare capacity, saying it is necessary to keep the world economy's recovery from the pandemic on track.
The worsening global outlook has led to a decline in crude futures, the IEA said, while premiums for physical barrels have grown this summer due to higher seasonal demand and constrained supplies.
