Tricky Balances Steer Oil Into Risky Summer

As the peak summer demand season approaches, crude markets look well supplied, thanks to large releases of strategic reserves and falling expectations for consumption. But the situation remains dicey, with the biggest risk being a formal EU ban of Russian petroleum imports. This would not only tighten crude markets but exacerbate an already-thorny situation in refined products markets. An outright ban would force consumers globally to tighten their belts since there is not enough fuel to replace Russian product exports, which could drive prices across the petroleum complex even higher. Despite high energy prices and inflation, the Ukraine crisis, China's Covid-19 lockdowns and other headwinds to economic growth, oil demand is still set to rise significantly as the world recovers from the pandemic. Energy Intelligence sees global oil demand growing by 2.6 million barrels per day to 100.1 million b/d in 2022. That is down from a forecast for 3.2 million b/d growth before Russia’s Feb. 24 invasion of Ukraine but still more optimistic than the International Energy Agency's (IEA) outlook. The IEA projects global demand growth of 1.9 million b/d to 99.4 million b/d, down from 100.7 million b/d before the outbreak of the Ukraine war. Opec is most optimistic. It sees demand adding 3.7 million b/d in 2022 to 100.5 million b/d, after a 500,000 b/d downward revision to account for recent events.