India and China are set to contribute nearly 50 per cent to the increase in the global demand for oil over the next five years, the International Energy Agency (IEA) said in its report on oil sector for 2018.
According to IEA, demand is expected to grow at an annual rate of 1.2 million barrels per day (mbd) until 2023, as the oil demand would reach 104.7 mbd, up by 6.9 mb day from 2018. “As China’s economy becomes more consumer-oriented, the rate of growth in oil demand slows down to 2023, compared with the 2010-17 period. By comparison, the pace of oil demand growth will pick up slightly in India,” it says.
The report says that though there is no peak oil demand in sight, the pace of growth will slow down to 1 mb per day by 2023 after expanding by 1.4 mb per day in 2018. “There are signs of substitution of oil by other energy sources in various countries. A prime example is China, which has some of the world’s most-stringent fuel efficiency and emission regulations. As the country recognises the urgent need to tackle poor air quality in cities, efforts are intensifying,” it adds.
The report highlighted that sales of electric vehicles were rising and there was strong growth in the deployment of natural gas vehicles, particularly in fleets of trucks and buses. It said a rising number of electric buses and LNG-fuelled trucks in China would significantly slow down gasoil demand growth.
“Oil market is likely to tighten by 2023 with increased risk of price volatility. The market could go through two phases during the next six years. Through 2020, record supply from non-OPEC countries more than covers expected demand growth. By 2023, if investments remain insufficient, the effective global spare capacity cushion falls to only 2.2 per cent of demand and raises the possibility of oil prices becoming more volatile until new supplies come on line,” research agency CARE Ratings said in its comments on the IEA report. It added that there would still be a continued reliance on OPEC countries for a major share of global supply.
“Within OPEC, more than 2 mbd of spare capacity is held in Saudi Arabia. In turn, this emphasises the crucial role OPEC’s largest producer continues to play in providing stability to global oil markets,” it said.