According to the International Energy Agency (IEA), China’s reopening will increase global oil demand to a record high of 101.7 million barrels per day (bpd) this year, up 1.9 million bpd from 2022. The IEA also increased its demand growth estimate for 2023 by 200,000 bpd from the 1.7 million bpd growth expected in December.

According to the IEA’s closely-watched Oil Market Report (OMR) for January, China will account for nearly half of the growth in global oil demand this year after Beijing lifted its COVID restrictions. Meanwhile, global oil supply growth is expected to slow to 1 million bpd in 2023 from last year’s OPEC+-led growth of 4.7 million bpd.

In the report, IEA said: “An overall non-OPEC+ rise of 1.9 mb/d will be tempered by an OPEC+ drop of 870 kb/d due to expected declines in Russia.”

“This year could see oil demand rise by 1.9 mb/d to reach 101.7 mb/d, the highest ever, tightening the balances as Russian supply slows under the full impact of sanctions. China will drive nearly half this global demand growth even as the shape and speed of its reopening remains uncertain.”

The EU ban on Russian oil products could soon mean that “the well-supplied oil balance at the start of 2023 could quickly tighten however as western sanctions impact Russian exports.”

The two wild cards in the market this year will be Russia and China, it was said. Despite the EU embargo and the G7 price cap, Russian oil exports decreased by barely 200,000 bpd in December. However, the agency estimates that the record price cuts on Russian benchmark export grades decreased Russia’s oil revenues by $3 billion to $12.6 billion last month, the lowest level since February 2021.

Oil prices continued to rise early on Wednesday as a result of the IEA’s optimistic prognosis for demand this year. WTI Crude was up 1.83% to $81.68 at 6:15 a.m. ET. Brent Crude traded at $87.29, up 1.49% on the day, after surpassing the $87 threshold.