Global oil demand seen lower on China’s Covid lockdown, says IEA

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The International Energy Agency (IEA) said that severe new lockdown measures amid surging Covid cases in China have led to a downward revision in its expectations for global oil demand in 2Q22 and for the year as a whole.

“Weaker-than-expected demand in OECD countries at the start of the year added to the decline. As a result, our estimate for global oil demand has been lowered by 260 kb/d for the year versus last month’s Report, and demand is now expected to average 99.4 mb/d in 2022, up by 1.9 mb/d from 2021,” it said in its latest monthly report.

Here are the key highlights of the report:

  • Global oil supply rose in March by 450 kb/d to 99.1 mb/d, led by non-OPEC+. Russian oil supply is expected to fall by 1.5 mb/d in April, with shut-ins projected to accelerate to around 3 mb/d from May. Despite the disruption to Russian oil supplies, lower demand expectations, steady output increases from OPEC+ members along with the US and other non-OPEC+ countries, and massive stock releases from IEA member countries should prevent a sharp deficit from developing.
  • Global refinery throughputs are forecast to increase by 4.4 mb/d from April to August due to new capacity and normal seasonal gains. This would allow product inventories to see the first build in two years, offering some respite to the tight market. Overall, 2022 runs are forecast to gain 3 mb/d y-o-y, but will remain below 2017 levels.
  • Global oil inventories have decreased for 14 consecutive months, with February stocks 714 mb below the end-2020 level and OECD countries accounting for 70% of the decline. OECD total industry stocks fell by 42.2 mb to 2 611 mb in February, nearly double the seasonal trend. Preliminary data show a build in OECD industry stocks of 8.8 mb for March.
  • Futures prices for ICE Brent were trading at around $104/bbl as this Report went to print, down nearly $10/bbl following IEA collective stock release actions and a massive US release from the strategic petroleum reserve. Benchmark crude prices are now back to near pre-invasion levels but remain troublingly high and are a serious threat for the global economic outlook.

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