IEA says world oil demand 'scaling record highs'

Investing.com -- Oil demand is touching record high, thanks in part to a surge in air travel this summer and increased oil use in power generation, according to a new report from the International Energy Agency on Friday.

Demand touched an all-time high of 103 million bpd in June and could rise to a fresh peak this month, the IEA predicted. Overall consumption also expanded once again in the April to June period after two straight quarters of contraction.

The IEA estimated that global demand for crude would expand by 2.2M barrels per day (bpd) to 102.2M bpd this year, with China accounting for more than 70% of that growth despite continued concerns over a sputtering post-COVID recovery in the world's top crude importer.

Meanwhile, OPEC+ production cuts may further eat away at inventories later this year, the IEA noted, giving an extra boost to prices. The Paris-based watchdog predicted that inventories could draw by 2.2M bpd in the third quarter and 1.2M bpd in the final three months of 2023 should the output reductions remain in place.

"Market balances are set to tighten further into the autumn as Saudi Arabia and Russia extend supply cuts at least through September," the IEA said.

But the agency flagged that demand growth is expected to slow to 1M barrels per day next year, citing lackluster economic conditions as a wave of activity following the pandemic subsides. More stringent efficiency standards and the popularity of electric cars are also seen weighing on oil demand, the IEA added.