The state-owned Aramco believes that the oil demand forecast for the rest of 2023 is solid even though metrics point to a dwindling economy.
Saudi-owned oil and gas firm Saudi Aramco has a strong outlook on oil for the rest of the year as it anticipates healthy demand from India and China. Saudi Aramco predicts strong demand from both countries regardless of an economic retraction expected in global markets.
Speaking at the Energy Asia conference in Kuala Lumpur, Aramco CEO Amin Nasser said oil market fundamentals “remain generally sound” for 2023. He maintained this expectation, notwithstanding several signs of economic decline in China and India.
“Despite the recession risks in several OECD countries, the economies of developing countries, especially China and India, are driving oil demand growth of more than 2 million barrels per day this year,” said he.
In May, China’s exports fell to $283.5 billion, according to customs data, representing a heavy 7.5% year-on-year (YoY) decrease. Analysts polled by Reuters had expected a mild 0.4% drop. In addition, customs data also showed that China’s exports to the European Union (EU) in the same period fell by 4.9%. Furthermore, the dollar value of exports from January to May plunged by 15.1%.
Last week, investment banking and management giant Goldman Sachs reduced its growth outlook for China’s 2023 gross domestic product (GDP) from 6% to 5.4%. Goldman also reduced the outlook for 2024 from 4.6% to 4.5%. In addition to Goldman, several other financial services giants had cut their outlook on China’s growth. Reduced outlooks came from Bank of America, JPMorgan, Standard Chartered, UBS, and Nomura.
Aramco to Expect Rise in India’s Oil Demand Along With China’s
Saudi Aramco’s expectation of solid oil demand corroborates a forecast published by the International Energy Agency (IEA). In a recently-released medium-term market report, the IEA predicts that global oil demand will hit 2.4 million barrels per day this year. The agency also said China is responsible for 60% of the increase.
Furthermore, the IEA’s report also indicates that demand from India is “equally robust”. According to the agency, May figures in India show the country’s demand for diesel and gasoline broke records.
Oil Consumption to Peak Before 2030
Although Aramco and IEA predictions for oil demand are bullish for the year, the outlook differs for the decade. According to the IEA, global oil demand will nearly halt by 2028. The agency believes the world’s current shift to clean energy, including the continued adoption of electric vehicles, will affect oil demand.
The IEA added that China’s ability to maintain its pre-COVID momentum would affect the global outlook. Based on the IEA’s prediction, China’s consumption will peak this year after rebounding to 1.5 million barrels per day. However, consumption could fall to 290,000 per day YoY from next year until 2028.
On the other hand, the IEA’s outlook for supply is healthy. The agency estimates that global supply capacity will hit 111 million barrels per day by 2028, rising by 5.9 million barrels per day. The increase will create an extra 4.1 million barrels per day, especially in the UAE and Saudi Arabia.