New Delhi: A recovery in global oil demand from a low of 97.9 million barrel per day (mb/d) in May (a decline of 5.3 mb/d year-on-year) is underway and by October, the International Energy Agency (IEA) expects global demand to be up by more than 8 mb/d from the May low point, putting it above 2025 levels for the first time since February.
According to the agency, the upswing in fuel use during the peak summer travel season is set to get an additional boost from the release of pent-up demand.
“Even so, global oil demand is projected to decline by 1 mb/d this year before rebounding by 2 mb/d in 2027,” the IEA said in its latest ‘Oil market Report.
While the global oil market balance looks set to swing back to surplus towards the end of the year, the forecast hinges on the assumption that tanker flows through the Strait will gradually recover, allowing producers to restart fields and refiners in the Middle East and elsewhere to resume product shipments.
“Renewed exchanges of fire in the Gulf this week highlight the risks of not reaching a lasting peace agreement, which is a must for the normalisation in oil markets,” said the agency.
Global observed oil inventories rose for the first time in four months in June, by 21 mb, as sharply higher oil on water volumes more than offset continued draws in onshore tanks.
Following a decline of 73 mb in May, total OECD stocks fell by a further 62 mb in June, of which an estimated 44 mb came from government stock releases. Non-OECD crude stocks eased by 37 mb in June, led by a 41 mb draw in China, said the report.
The IEA further stated that benchmark crude oil prices continued to spiral lower in June, erasing all of their wartime gains, as tanker traffic out of the Gulf picked up and market focus shifted to the prospect of oversupply.
North Sea Dated crude plunged by $22/bbl month-on-month, to around $68/bbl, with prompt time spreads reverting to contango.
“Prices rose after the ceasefire agreement was breached on July 7-8, with dated trading around $77/bbl at the time of writing,” said the IEA.
While a wave of crude oil hit the market, refinery activity and product supplies have been much slower to respond.
Gulf exports of refined products and LPG in June remained less than half their pre-war levels, compared with crude flows that reached nearly three-quarters of their February rates.
“Loadings from key export refineries in the Gulf have yet to resume, suggesting operations remain constrained. Against this backdrop, intensifying Ukrainian attacks on Russian refineries and export infrastructure have further tightened product markets in Russia and beyond, with exports and domestic fuel deliveries both significantly impacted,” said the IEA.
