The International Energy Agency's (IEA) head, Fatih Birol, said that he expects European oil markets to face three main challenges in the upcoming year. In an interview with CNBC, Birol said the continent did manage to overcome several challenges last winter. However, this is not to imply Europe has passed the danger zone. Birol specified the first challenge to be the expected rise in Chinese demand following its exit from zero-Covid policy. The IEA anticipates global oil demand to exceed two million bpd, accounting for about 60 percent of demand increase. Similar is the case with LNG, where demand is also expected to rise during the second half of the year. Chinese demand is seen as a "key determiner" of demand for natural gas markets. As for the second challenge, it pertains to the possible U.S. debt default. Joe Biden is currently undergoing negotiations with Republicans over the debt ceiling, which might result in debt default. Although unlikely to occur, significant drop in oil prices is expected to result from such a default. The reliance on Russian energy exports constitutes the third challenge for Europe. The Russian-Ukrainian war has radically changed the global outlook of energy supply especially in Europe. Many European countries have faced an energy crisis last year as a result of cutting Russian exports of oil and gas. Birol referred to the possibility similar crisis reoccur next winter if the political tensions were to persist.
