Blow for Putin and MBS as oil demand set to slow
Projections for the expansion of worldwide oil consumption in the following year have been revised downwards due to the slowdown in post-pandemic recuperation, coinciding with a significant increase in the adoption of electric vehicles (EVs).
According to the International Energy Agency (IEA), the surge in demand is projected to be relatively modest, with an increase of only one million barrels per day (bpd) by 2024. This figure is 150,000 bpd lower than the agency's previous estimate.
This news will surely hit hard for both the Russian leader, Vladimir Putin, who relies on oil and gas earnings to finance his conflict in Ukraine, and the Saudi Arabian Crown Prince, Mohammed bin Salman, who is banking on oil profits to support the nation's economic expansion.
The International Energy Agency stated that due to the dwindling momentum of the post-pandemic recovery and unsatisfactory economic circumstances, as well as the enforcement of stricter efficiency regulations and the introduction of novel electric vehicles, the growth is projected to decelerate to 1 million barrels per day by 2024.
According to the energy watchdog in Paris, there will be a significant increase in the sales of electric vehicles by the conclusion of 2023. It is projected that around 14 million electric vehicles will be purchased during that period, which reflects a 35 percent rise when compared to the sales in 2022.
By the year 2030, it predicts that the adoption of electric vehicles will result in the replacement of approximately five million barrels of oil consumption per day.
However, at present, there is still a significant increase in global oil consumption due to the reopening of China after the pandemic and an upturn in international air travel.
In the month of June, the demand reached a record high of 103 million barrels per day. According to the International Energy Agency (IEA), the demand in August has the potential to exceed this extraordinary level.
The IEA has announced that worldwide oil consumption is expected to increase by 2.2 million barrels per day (bpd) in 2022, reaching a total of 102.2 million bpd. China will be responsible for over 70% of this surge in demand.
Meanwhile, a sequence of reductions in production spearheaded by Saudi Arabia has sparked an upsurge in prices, with Brent crude surpassing $88 per barrel on Thursday - the highest it has been since January.
In July, the worldwide oil supply significantly decreased by almost one million barrels per day (bpd) to reach 100.9 million bpd. This decline can be attributed to significant reductions in production carried out by Saudi Arabia and its partners.
Nevertheless, the analysis conducted by the IEA revealed that Putin and the Saudi Crown Prince might not be able to depend on this thriving period in the long run.
The article mentioned that the increase in demand will decrease by more than half in the upcoming year. This is due to the hinderance of economic growth in the Western countries caused by high interest rates. Additionally, the imposition of green energy policies will limit the amount of demand.
The International Energy Agency (IEA) also stated that the overall financial prospects on a global scale continue to be complicated due to the escalating rates of interest and stricter lending criteria from financial institutions. Consequently, this is placing an additional burden on businesses that are already struggling with sluggish growth in the manufacturing and trade sectors.
