Global oil demand continues to recover following COVID and as China’s pandemic related restrictions are lifted. The International Energy Agency (IEA) is forecasting global oil demand to increase by 1.9 million barrels per day to 101.7 million barrels. Nearly half of this increase in demand will come from China as a result of the lifting of their COVID restrictions. It is not just the lifting of restrictions in China driving this demand but the continued return to post-pandemic life. This can be seen in the increase for jet fuel driven by the resumption of leisure travel. Of the added 1.9 million barrels per day, over 800,000 barrels are for jet fuel alone.
As oil demand increases, the rate of supply growth is slowing. During 2022, supply increased by nearly 4.7 million barrels per day. During 2023, however, the IEA is forecasting supply to increase by only about 1 million barrels per day. This bodes well for the continued robust activity in the offshore sector including the US Gulf of Mexico. The current global deepwater rig fleet is at 90% utilization and demand for deepwater rigs is growing given the increasing demand for oil. The first of Transocean’s two newest and most capable deepwater rigs just went into service for Chevron with the second rig expected to also join service in the USGOM. Currently, the us USGOM accounts for 1.8 million barrels per day of the 12 million barrels the US produces—which is still below pre-pandemic levels. Added production from domestic deepwater sources will be key to filling this supply gap.