IEA: Lower Demand Offsets Loss of Russian Oil

Copyright © 2023 Energy Intelligence Group All rights reserved. Unauthorized access or electronic forwarding, even for internal use, is prohibited.
Michel Euler/AP

The International Energy Agency (IEA) has lowered its estimate of global oil demand for this year in response to China's Covid-19 outbreak and lower than expected consumption in the US and other OECD economies so far this year.

In its latest monthly Oil Market Report, the IEA now pegs demand for the current year at 99.4 million barrels per day — down 260,000 b/d from its March estimate.

The agency notes that large releases of oil from the stockpiles of the US and other IEA member nations have brought "welcome relief" to a tight market.

This has helped bring crude prices down from their March highs of more than $120 per barrel following Russia's Feb. 24 invasion of Ukraine.

But the IEA adds that prices "remain troublingly high and are a serious threat for the global economic outlook."

The agency now estimates that sanctions and voluntary decisions to boycott its oil will force Russia to shut in an average of 1.5 million b/d of supply in April, rising to 3 million b/d in May as it runs out of storage capacity.

The IEA had previously forecast that the higher figure could be reached by April.

Supply Boost

"Lower demand expectations and steady output increases from Middle East Opec-plus members along with the US and other countries outside the Opec-plus alliance should bring the market back to balance," the report said.

The IEA sees Opec-plus (excluding Russia) increasing its combined output by 3.5 million b/d this year, led by Saudi Arabia. It sees output from other producers increasing by 2 million b/d, led by the US.

The agency lowered its estimates of Chinese oil demand for March (-730,000 b/d), April (-920,000 b/d) and May (-690,000 b/d) because the Covid-19 outbreak there and measures to tackle it "have been more severe than expected."

The IEA expects Russian oil demand to fall by 250,000 b/d this year, which represents an upward revision of 50,000 b/d.

High oil prices have been contributing to the highest levels of inflation since the 1980s, with the US consumer price index for March rising 8.5% over the past year.

Central banks are responding by raising interest rates but this is likely to slow down economic activity and dampen demand for oil.

Among other signals of a global slowdown, the Kiel Institute for the World Economy reported a 2.8% month-on-month fall in its Trade Indicator for March, with declines in exports of 5% for Russia, 5.6% for the EU and 3.4% for the US.

IEA Supply and Demand Projections
(million b/d)2020Q1'21Q2'21Q3'21Q4'212021Q1'22Q2'22Q3'22Q4'222022
Oil Demand91.994.396.398.8100.597.598.598.3100.1100.599.4
Non-Opec Supply63.061.963.564.365.063.765.063.764.464.864.5
Opec NGLs5.
Call on Opec Crude + Stock Change23.827.327.729.330.328.728.329.230.330.229.5

Oil Forecasts, Oil Demand, Oil Supply, Military Conflict, Sanctions
Wanda Ad #2 (article footer)
Egypt has launched a new upstream bid round for 23 blocks as it faces amid a looming gas supply crunch.
Mon, Sep 25, 2023
Even though Nigeria is West Africa’s largest crude oil producer, the owners of the refinery have to import cargoes of US crude because Nigerian national oil company NNPC overcommitted on crude sales.
Mon, Sep 25, 2023
Russia's draft budget and energy industry forecasts project an image of resilience against the backdrop of the war in Ukraine and Western sanctions.
Mon, Sep 25, 2023