International Energy Agency (IEA) head Fatih Birol said on Thursday that energy markets could be tighter in 2023, adding he hoped prices would not rise further in order to ease the pressure on energy-importing developing countries.
“I wouldn’t be too relaxed about the markets and 2023 may well be a year where we see tighter markets than some colleagues may think,” IEA Executive Director Birol said in an interview with the Reuters Global Markets Forum in Davos.
Two Gulf OPEC+ producers, UAE energy minister Suhail al-Mazrouei and Saudi Aramco chief Amin Nasser, have said this week they see oil markets as balanced.
Birol told Reuters on the sidelines of the World Economic Forum (WEF) annual meeting in Davos that even though currently there was no tightness in the market, there were uncertainties to watch out for, namely Chinese demand and Russian supply.
“If (the) Chinese economy rebounds this year, which many financial institutions expect, then we may see demand to be very strong and put pressure on the markets,” he said.
On Russia, Birol said there were many question marks over its ability to export because of Western sanctions, but also longer term because of its own challenges.
International firms that had helped Russian oilfields become productive have all left, he said.
“Looking a bit longer term, I believe Russia’s oil industry will face huge challenges.”
The IEA overestimated the impact of Western sanctions on Russian oil export volumes at the start of the Ukraine invasion by a wide margin, saying oil markets could lose as much as 3 million barrels per day.
Birol said Russian oil exports seemed to be more “resilient” than predicted at the beginning of last year, but that they were correct in terms of “the direction of travel”.
“Russia’s oil exports are declining now, as we have forecasted, and will decline further in the first quarter of this year and beyond,” he said, adding that Russian crude and products would continue to bought in Asia, specifically in India and in China.
On Russian product price caps which may come into effect next month, Birol said he was concerned about diesel supply.
“It looks a bit more complicated, and I hope that it will not lead to challenges and tightness in the product markets especially for diesel.”