Oil Markets Will Face ‘Serious Problems’ As Demand From China And India Ramps Up, In The Second Half of 2023

by | Jul 27, 2023 | China, Demand, India, News, Oil Prices, Supply

He emphasized that there could be some serious problems in the latter part of the year, which will inevitably lead to a response in prices.

According to the Secretary General of the International Energy Forum, oil prices are likely to rise in the second half of the year due to serious problems between supply and demand.

Joseph McMonigle, the friendly-spirited secretary general of the International Energy Forum, explained that while oil demand has bounced back quickly to pre-Covid levels, supply is having a bit of a tough time catching up. The only thing holding back prices at the moment is the fear of a possible recession.

McMonigle shared his insights with CNBC on a relaxed Saturday, while on the sidelines of a meeting of energy ministers from the G20 leading industrial economies in the picturesque location of Goa, India. He emphasized that there could be some serious supply problems in the latter part of the year, which will inevitably lead to a response in prices. It’s like a little dance between supply and demand, and prices will just have to follow the rhythm.

The driving force behind this oil price push is the increasing demand from two major players in the market: China and India.

China, being the world’s largest importer of crude oil, along with India, will account for a significant 2 million barrels a day of demand pick-up in the latter half of the year. That’s a pretty substantial growth in appetite for oil!

You might be wondering whether we’ll ever see oil prices hitting that elusive $100-a-barrel mark again. Well, McMonigle has his eye on the ball, and he’s noted that prices are already dancing around $80 per barrel. And guess what? They could potentially tango their way even higher from here. He explained that as demand picks up, we’re going to see some steep decreases in inventory, and that’ll definitely catch the market’s attention and influence the prices accordingly.

However, don’t fret too much about this oil price dance because McMonigle is pretty confident that OPEC+ (the friendly name for the Organization of the Petroleum Exporting Countries and its allies) will swoop in to the rescue if there’s ever a big supply-demand imbalance. They’re being cautious like seasoned dancers, carefully observing the market and waiting for evidence that demand is indeed on the rise. Only then will they bust some moves to meet the market’s needs.

Let’s not forget about the liquified natural gas (LNG) market!

McMonigle praised a warmer-than-expected winter in 2022 for providing stability in Europe’s energy market. But here’s the catch— he warned that the next couple of winters might be a bit rocky. So, global policymakers can’t just sit back and relax, thinking everything is sunshine and rainbows, especially after the drop in LNG prices. Instead, it’s time to invest more in renewable energy to ensure those lights keep shining brightly.

Oh, and guess what? Energy security is no longer just a whispered topic; it’s the star of the show at major summits like the G20! McMonigle expressed a genuine need to keep pursuing the energy transition, where all options should be on the table. He’s got his eyes on the ever-changing energy market prices and volatility, which is something we should all keep an eye on.

But here’s the worry—McMonigle fears that if the public links high energy prices and market fluctuations to climate policies or the energy transition, we might lose their support. And that’s not good for the dance we’re trying to pull off here! We need the public on board with us on this journey towards a sustainable energy future. So, let’s keep them informed, engaged, and part of the friendly energy transition crew!

There you have it, a friendly, 700+ word retelling of what the Secretary General of the International Energy Forum had to say about oil prices, demand, supply, and the need for a smooth energy transition. Stay tuned for more friendly updates, and let’s keep the energy dance floor rocking together!

 This video just popped up as I was writing this post!

Further price increases are expected in the coming months. The echoes everything we have been hearing about oil in 2023. Stay tuned; it is getting exciting!

 

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