LONDON- Oil demand from China and developing countries, combined with OPEC+ supply cuts, is likely to keep the market tight in the second half of the year despite a sluggish global economy, the head of the International Energy Agency (IEA) said on Monday.
“Even in sluggish economic growth, China and other developing countries’ demand is strong,” IEA chief Fatih Birol told Reuters.
“Taken together with the production cuts coming from key producing countries, we still believe that we may see tightness in the market in the second half of this year.”
The Paris-based energy watchdog said last month the top oil importer’s demand rebound after lifting COVID-19 restrictions was robust, and that countries outside the OECD group of developed nations would make up 90 percent of demand growth this year.
Still, the world’s number two economy has registered some lacklustre economic data in recent weeks, with factory gate prices falling at the fastest pace in more than seven years in June, according to figures released on Monday.
Meanwhile Saudi Arabia will extend its 1 million barrel per day (bpd) output cut into August, and Russia will cut crude exports by 500,000 bpd.
The two countries are key producers in the OPEC+ bloc.
OPEC – the Organization of the Petroleum Exporting Countries – listed an even stronger than previously expected economic rebound in China as a potential upside factor for the market in its monthly oil report in June.
IEA also said supply of minerals critical to the energy transition could move close to levels needed to support climate pledges by 2030 after a surge in investment.
Consultants and analysts have warned of looming shortages due to surging demand for key minerals like lithium and cobalt used in electric vehicles, wind turbines and other clean energy technologies.
But after investment in critical minerals production jumped 30 percent last year to $41 billion, having gained 20 percent in 2021, that picture is looking brighter, the IEA said.
In key battery mineral lithium, the IEA forecasts supply by 2030 will reach 420,000 metric tons – only a touch short of demand estimated at 443,000 to meet government pledges, though well below the 702,000 required for net zero.
“We are happy that for a change we can give some good news,” IEA Executive Director Fatih Birol told Reuters in an interview.
“This is testimony that the markets are buying in to the fact that the clean energy transition is moving very fast.”
Critical mineral start-up firms raised a record $1.6 billion in 2022, up 160 percent from the previous year, the IEA said.
Demand for critical minerals has surged over the past five years, including a tripling in consumption of lithium and a jump of 70 percent for cobalt, with the total critical mineral market now worth $320 billion, it said.
While the supply picture is improving, the Paris-based energy watchdog warned that delays and cost overruns for projects posed a risk to the upbeat scenario. – Reuters
