SINGAPORE- Tightening markets for liquefied natural gas (LNG) worldwide and major oil producers cutting supply have put the world in the middle of “the first truly global energy crisis”, the head of the International Energy Agency (IEA) said on Tuesday.
Rising imports of LNG to Europe amid the Ukraine crisis and a potential rebound in Chinese appetite for the fuel will tighten the market as only 20 billion cubic meters of new LNG capacity will come to market next year, IEA Executive Director FatihBirol said during the Singapore International Energy Week.
At the same time the recent decision by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, to cut 2 million barrels per day (bpd) of output is a “risky” decision as the IEA sees global oil demand growth of close to 2 million bpd this year, Birol said.
“(It is) especially risky as several economies around the world are on the brink of a recession, if that we are talking about the global recession…I found this decision really unfortunate,” he said.
But Birol also said the current energy crisis could be a turning point in the history of energy for accelerating clean energy sources and for forming a sustainable and secured energy system.
“Energy security is the number one driver (of the energy transition),” said Birol, as countries see energy technologies and renewables as a solution.
Global oil demand growth will rebound strongly next year as China eases COVID lockdowns, the IEA said earlier, adding that an economic slowdown will pause growth only briefly at the end of this year.
The outlook preserves a relatively bullish view for robust growth next year despite economic headwinds, built on the expectation that China will get back to work while growth in air travel will boost jet fuel demand.
The IEA’s forecast of demand growth this year of 2 million barrels per day (bpd) is mostly concentrated in the first half of the year and is set to fall to nothing in the fourth quarter.
Offsetting the hit to demand by the economy, a switch from gas to oil for power generation will provide a 700,000 bpd boost in the last quarter of this year and the first of the next especially in Europe and the Middle East, the IEA said.
For 2023, growth is set for 2.1 million bpd mostly due to hopes of recovery in China.
Rich countries in the Organisation for Economic Cooperation and Development (OECD) accounted for most of the rise in demand this year, while countries outside the group especially China will underpin growth next year provided Beijing relaxes its COVID curbs.
“Non-OECD countries will cover three-quarters of 2023’s gains if China reopens as expected,” the IEA added.
Meanwhile Russian oil exports are set for a bumpy ride as the European Union plans to impose a ban on maritime services transporting it on Dec. 5.
