Aramco boss announces recovery in China could lead to oil shortage: what exactly is it? – Business AM

In the news : Aramco boss announces possible supply shortage.

• is asked by CNBCAmin Nasser indicated that the supply of oil could not meet the demand.
• “Currently, the potential is large enough to handle any disruption. But in the medium and long term, I am not sure that this will be the case, because this reserve capacity will decrease.”

Detail : China, but not only.

• Concerns shared by the head of the world’s largest oil group are not only related to the recovery of the Chinese economy.
• In an interview, he explained that he fears the consequences of the Russia-Ukraine war – a decrease in supplies from Russia and an increase in demand from the aviation industry.
• Of course, these announcements should be put in context. Because if oil really ran out, its price would skyrocket. Ads like this alone can have such an impact. All profits for Aramco.
  • Maarten Vetselaar, head of the Spanish oil company Cepsa, also predicted that the price of one barrel of Brent oil could reach the 2018 bar again. 100 dollars in the second half of 2023.
  • Currently, one barrel of Brent oil is 87 dollars.
• It should also be noted that Nasser has pleaded for more investment in hydrocarbons worldwide, indicating that the investments provided by Saudi Arabia will not be enough.

Predictions for 2023

Analysis : What does the IEA say?

• In its monthly oil report published this week, the International Energy Agency (IEA) made the same observation as Nasser:
  • Due to sanctions, Russian supply is slowing and will continue to weaken.
  • China’s demand will increase, but exactly when and by what rate is unknown. This will reverberate with rebounds in other Asian countries. This will have an impact elsewhere in the world, with most analysts predicting that a recession in Europe and the US – if it comes – will ultimately be mild.
  • There are still two gaps in the gray:
    • American supply will increase during the year. The same goes for what Canada, Brazil and Guyana have to offer, although it’s less on balance.
    • With the increase in electric vehicles and the increase in energy efficiency of those with internal combustion engines, demand from the automotive sector will decrease.
• According to IEA forecasts:
  • In 2023, supply will decrease by 1 million barrels per day.
  • During the year, the demand will increase by 1.9 million barrels per day. Global demand should be a record 101.7 million barrels per day.

The result : don’t panic, but…

• The IEA does not declare an oil shortage in its report. He points out that even in the last quarter of 2022, supply exceeded demand – thanks to very special conditions.
  • However, he notes that niche markets such as diesel are indeed particularly tight.
• “Oil conservation and government measures have been helpful in managing market risk during the energy crisis caused by Russia’s aggression in Ukraine,” the agency notes.
• “Going forward, it will be more important than ever to accelerate efficiency gains, support electric vehicle adoption and carefully manage the public inventory,” he said.