According to the executive director of the International Energy Agency, the largest uncertainty confronting global energy markets is the degree to which China has recovered from its lengthy shutdown.
Oil markets are “balanced,” according to Fatih Birol, speaking to CNBC’s Hadley Gamble at the Munich Security Conference. But, producers are waiting for future demand from the world’s second-biggest economy and the world’s top crude oil importer.
“For me, the largest answer to the energy markets in the coming months comes from China,” Birol added, highlighting a significant decline in the country’s oil and gas consumption during pandemic lockdowns.
According to the energy agency’s latest monthly Oil Market Report, released on Wednesday, global oil consumption will climb in 2023, with China accounting for a significant chunk of the predicted increase.
The IEA predicts that oil deliveries will increase by 1.1 million barrels per day to 7.2 million barrels by 2023, with overall demand hitting record 101.9 million barrels daily.
If the recovery is robust, oil companies may be forced to raise output.
Fatih Birol is the Executive Director of the International Energy Agency.
“China’s economy is now recovering,” Birol said. “The strength of this advantage will determine the dynamics of the oil and gas markets.”
“If there is a significant bounce, oil companies may need to expand their output,” he continued.
The IEA chairman said that OPEC+ countries and other major oil-producing nations such as the United States, Brazil, and Guyana were ready to increase production to satisfy that demand if necessary.
Joe Biden’s Inflation Reduction Act (IRA)
When asked if President Joe Biden’s Inflation Reduction Act (IRA), with its package of money focused on rewarding renewable energy, might enhance output in the United States, Birol stated it was doubtful.
“I believe it goes beyond the policies of the administration. There’s a lot of money to be earned,” he remarked, citing record profits reported by global oil and gas corporations in the previous year as evidence.
The IRA is the “biggest significant climate action since Paris.” 2015
Birol stressed that the IRA was critical in hastening the global renewable energy transition, calling it the “single most significant climate step since the 2015 Paris deal.”
The global energy crisis, exacerbated by Russia’s invasion of Ukraine, is “supercharging” the transition to renewable energy, according to the IEA’s chairman.
He also said that he expects other governments and areas to announce similar renewable energy investment packages shortly.
“I’m confident Europe will come up with a comparable energy package sooner or later,” he said.
“We are approaching a new industrial era: the age of clean energy technology manufacture,” he said, including wind, solar, and nuclear energy. “They will be the buzzwords for the next several years.”
