Author Archives: ETA

Source : IEA

November 2023

About this report.

The IEA Oil Market Report (OMR) is one of the world’s most authoritative and timely sources of data, forecasts and analysis on the global oil market – including detailed statistics and commentary on oil supply, demand, inventories, prices and refining activity, as well as oil trade for IEA and selected non-IEA countries.

Highlights

• Chinese oil demand rose to another record high of 17.1 mb/d in September, underpinning global growth. China is set to account for 1.8 mb/d of the total 2.4 mb/d increase that lifts demand to 102 mb/d in 2023. Overall growth is expected to slow to 930 kb/d in 2024. In the OECD, economic headwinds are increasingly apparent, with this year’s slim demand gains giving way to a contraction in 2024.
• World oil output increased by 320 kb/d in October to 102 mb/d. Growth in the United States and Brazil is outperforming forecasts, helping to propel global supply higher by 1.7 mb/d to a record 101.8 mb/d in 2023. Non-OPEC+ will again drive overall growth in 2024, projected at 1.6 mb/d. There has been no material impact on oil supply flows from the war between Israel and Hamas that started in early October.
• Refinery margins collapsed in October from the near-record levels achieved during 3Q23. Weaker gasoline cracks drove much of the decline, but still-elevated middle distillate cracks ensured margins remain above the five-year average. Global crude runs are expected to rise by 1.9 mb/d in 2023 and 1 mb/d in 2024, to average 82.6 mb/d and 83.6 mb/d, respectively.
• Russian oil exports eased by 70 kb/d in October, to 7.5 mb/d, as higher crude oil shipments failed to offset a decline in product flows. Estimated export revenues fell by $25 million to $18.34 billion as lower international oil prices more than offset a narrowing discount for Russian grades versus North Sea Dated. Russian crude and product prices, apart from gasoline and VGO, were above the G7 Price Cap.
• Global observed inventories rose by 9.9 mb in September but remain near historical lows. Oil on water rebounded by 25.3 mb and OECD stocks inched up by 2.9 mb while non-OECD inventories declined by 18.3 mb. In 3Q23, crude oil stocks plunged by a massive 141.4 mb and oil product built by 112.7 mb as supply cuts by OPEC+ countries coincided with increased refinery activity.
• ICE Brent futures slumped by $8/bbl during October, as the macroeconomic outlook deteriorated and supply fears following the Hamas attack on Israel subsided. Crude’s forward structure eased in tandem with flat prices, as contango returned to prompt WTI time spreads for the first time since July. The price rout continued into early November. At the time of writing, Brent was trading at $82/bbl.

Exceedign Expectations

The market rally that pushed benchmark oil prices towards triple digits in September reversed sharply in October, despite continued tight crude supplies and an intensifying conflict in the Middle East. In early November, ICE Brent futures plunged to a four-month low around $80/bbl.

The abrupt sell-off came as market concerns shifted from supply risks to the global economy and oil demand. In addition, front month paper market trade has moved to 1Q24 when markets appear more or less in surplus, adding to the downward pressure on prices. While this more bearish mood may be justified, world oil demand continues to exceed expectations. In this Report, we have slightly revised up our 2023 growth forecast to 2.4 mb/d, as US deliveries proved more resilient than indicated by preliminary data and Chinese oil demand in September set another all-time high above 17 mb/d, fuelled by a booming petrochemical sector. Those gains have come to the detriment of petrochemical producers elsewhere, most notably in Europe and advanced economies in Asia and Oceania. Indeed, the two regions saw 3Q23 oil demand slump by a combined 560 kb/d year-on-year. This year’s surge will take world oil demand to 102 mb/d before growth eases to 930 kb/d in 2024 as the last phase of the pandemic economic rebound dissipates and as advancing energy efficiency gains, expanding electric vehicle fleets and structural factors reassert themselves. Despite growth that is almost two-thirds lower than this year’s increase, global oil demand is set to rise to a record annual high of 102.9 mb/d in 2024.

World oil supply growth is also exceeding expectations. Fears that the war between Israel and Hamas would escalate into a wider regional conflict, disrupting oil supply flows, have yet to materialise. Barring large unforeseen outages, world oil supply is firmly on an upward trajectory, with October output up 320 kb/d m-o-m. Record output from the United States, Brazil and Guyana underpin this year’s 1.7 mb/d increase in global oil supplies, to a record 101.8 mb/d. In 2024, non-OPEC+ producers will continue to lead global growth, projected at 1.6 mb/d, to an unprecedented 103.4 mb/d. A temporary easing of US sanctions on Venezuela in late October is expected to have only a marginal impact on supply, as production increases from the country’s battered oil sector will take time and investment.

Meanwhile, top oil exporters Saudi Arabia and Russia confirmed in early November they would continue with their additional voluntary output cuts until the end of the year. Those cuts look set to keep the oil market in a significant deficit through year-end, with the OPEC+ alliance pumping 900 kb/d below the demand for its crude. Global observed crude oil inventories fell by a massive 140 mb over the third quarter to a fresh low, according to the available data, as refineries boosted activity ahead of seasonal maintenance. With demand growth set to slow, the market could shift into surplus at the start of 2024. For now, with demand still exceeding available supplies heading into the Northern Hemisphere winter, market balances will remain vulnerable to heightened economic and geopolitical risks – and further volatility ahead.

Source : IEA

October 2023

About this report

The IEA Oil Market Report (OMR) is one of the world’s most authoritative and timely sources of data, forecasts and analysis on the global oil market – including detailed statistics and commentary on oil supply, demand, inventories, prices and refining activity, as well as oil trade for IEA and selected non-IEA countries.

Highlights

• Evidence of demand destruction is appearing with preliminary September data showing that US gasoline consumption fell to two-decade lows. Buoyant demand growth in China, India and Brazil, nevertheless underpins an increase of 2.3 mb/d to 101.9 mb/d in 2023, of which China accounts for 77%. Growth slows to 900 kb/d in 2024, as efficiency gains and a deteriorating economic climate weigh on oil use.
• World oil output rose 270 kb/d in September to 101.6 mb/d, led by higher production from Nigeria and Kazakhstan. The Israel-Hamas conflict has not had any direct impact on oil flows. Driven by non-OPEC+ growth, global output will increase by 1.5 mb/d and 1.7 mb/d in 2023 and 2024, respectively, to new record highs. Overall OPEC+ output is set to decline in 2023, although Iran may rank as the world’s second largest source of growth after the United States.
• Refinery margins fell sharply from near-record levels over the course of September and into October, as gasoline and fuel oil cracks collapsed, but overall remained above the seasonal average. Global refinery throughput rates reached a summer peak of 83.6 mb/d in August, underpinned by record Chinese runs. Refinery crude runs are expected to rise by 1.7 mb/d in 2023 and by 1 mb/d next year.
• Global observed oil inventories tumbled by 63.9 mb in August, led by a massive 102.3 mb draw in crude oil stocks. Preliminary data suggest that on land inventories continued to draw in September, while oil on water rebounded as exports recovered. OECD industry stocks fell counter-seasonally by 6.5 mb in August to 2 816 mb, a substantial 105.3 mb below the five-year average.
• Russian oil export revenues surged by $1.8 bn to $18.8 bn in September, their highest since July 2022. Total oil exports rose by 460 kb/d to 7.6 mb/d, with crude oil accounting for 250 kb/d of the increase. The weighted average crude export price rose by $8/bbl to $81.80/bbl, narrowing its discount to North Sea Dated to $12.20/bbl, its lowest since March 2022.
• ICE Brent crude oil futures rose by $4/bbl after Hamas attacked Israel on 7 October as traders reassessed geopolitical risks. Tightening balances following Saudi Arabia’s extension of voluntary supply cuts had sent prices up by $8/bbl in September. However, gains subsequently dissipated in early October as renewed macro concerns took hold. At the time of writing, Brent traded at $87/bbl.

Escalating risks

A sharp escalation in geopolitical risk in the Middle East, a region accounting for more than one-third of the world’s seaborne oil trade, has markets on edge. The surprise attack by Hamas on Israel on 7 October spurred traders to price in a $3-4/bbl risk premium when markets opened. Prices have since stabilised, with benchmark Brent futures trading at around $87/bbl at the time of writing. While there has been no direct impact on physical supply, markets will remain on tenterhooks as the crisis unfolds.

Oil prices had already surged to almost $98/bbl in mid-September after Saudi Arabia and Russia extended their voluntary production cuts through year-end and as crude oil and distillate inventories drew to exceptionally low levels. Rising prices focused the market’s attention on the prospect that ‘higher for longer’ interest rates could slow economic and demand growth. By early October, Brent futures tumbled by more than $12/bbl to $84/bbl as supply fears gave way to deteriorating macroeconomic indicators and signs of demand destruction in the United States, where gasoline deliveries plunged to two-decade lows. Demand destruction has hit emerging markets even harder, as currency effects and the removal of subsidies have amplified the rise in fuel prices. However, growth continues apace in China, India and Brazil, underpinning forecast global oil demand gains for this year at around 2.3 mb/d, of which China accounts for 77%. Global oil demand growth is set to slow to 900 kb/d in 2024 as the post-Covid rebound runs out of steam while the economic expansion slows and energy efficiency improvements weigh on oil use.

Global supply growth this year and next, of 1.5 mb/d and 1.7 mb/d, respectively, is dominated by non-OPEC+ producers. As for the OPEC+ bloc, the supply story this year is one of contraction, although Iran is on course to rank as the world’s second biggest source of growth after the United States. Voluntary cuts are expected to keep the oil market in deficit as OPEC+ could pump 1.3 mb/d below the call on its crude in 4Q23. If extra cuts are unwound in January, the balance could shift to surplus, which would go some way to help replenish depleted inventories. Observed global oil stocks tumbled by 63.9 mb in August, with crude oil down by a massive 102.3 mb.

Middle distillate markets are tight heading into the Northern Hemisphere winter. Ten months after the EU embargo on Russian crude came into effect, European refiners still struggle to lift processing rates and diesel output. Sustained high gasoil imports will be required, but stringent winter quality specifications constrain the available supply pool. It may take another mild winter to avoid shortages.

The Middle East conflict is fraught with uncertainty and events are fast developing. Against a backdrop of tightly balanced oil markets anticipated by the IEA for some time, the international community will remain laser focused on risks to the region’s oil flows. The IEA will continue to monitor the oil market closely and, as ever, stands ready to act if necessary to ensure markets remain adequately supplied.

Source : IEA

September 2023

About this report

The IEA Oil Market Report (OMR) is one of the world’s most authoritative and timely sources of data, forecasts and analysis on the global oil market – including detailed statistics and commentary on oil supply, demand, inventories, prices and refining activity, as well as oil trade for IEA and selected non-IEA countries.

Highlights

• World oil demand remains on track to grow by 2.2 mb/d in 2023 to 101.8 mb/d, led by resurgent Chinese consumption, jet fuel and petrochemical feedstocks. In 2024, naphtha and LPG/ethane, especially in China, will dominate an overall increase of a more modest 990 kb/d, to 102.8 mb/d, reflecting below-trend GDP growth and a structural decline in road transport fuel use in major markets.
• The extension of output cuts by Saudi Arabia and Russia through year-end will lock in a substantial market deficit through 4Q23. So far this year, OPEC+ output has fallen by 2 mb/d with overall losses tempered by sharply higher Iranian flows. Non-OPEC+ supply rose by 1.9 mb/d to a record 50.5 mb/d by August. World supply in 2023 will rise by 1.5 mb/d, with the US, Iran and Brazil top sources of growth.
• Russian oil export revenues surged by $1.8 bn to $17.1 bn in August, as higher prices more than offset lower shipments. Led by a decline in product shipments, total Russian oil exports eased by 150 kb/d last month, to 7.2 mb/d, 570 kb/d below a year-ago. Shipments to China and India slumped to 3.9 mb/d from 4.7 mb/d in April and May but accounted for more than half the total volumes.
• Refinery margins hit an eight-month high in August as refiners struggled to keep up with oil demand growth, especially for middle distillates. Product cracks and margins reached near-record levels due to unplanned outages, feedstock quality issues, supply chain bottlenecks and low stocks. Global refinery runs are forecast to rise by 1.7 mb/d to 82.4 mb/d in 2023 and by 1.2 mb/d to 83.6 mb/d next year.
• Global observed oil inventories plummeted by 76.3 mb to a 13-month low in August, led by a hefty decline in oil on water. Non-OECD oil stocks fell by 20.8 mb with the largest draw seen in China, while OECD inventories eased by 3.2 mb. In July, OECD industry stocks rose by 26.7 mb to 2 814 mb but remained 102.6 mb below their five-year average.
• Oil prices traded in a narrow range throughout August, with North Sea Dated hovering around $85/bbl and price volatility at multi-year lows. Prices moved higher by end-month as fundamentals came to the fore once again and breached $90/bbl for the first time in 10 months after Saudi Arabia and Russia extended voluntary production cuts until the end of 2023.

40 years on

The very first edition of the IEA’s benchmark Oil Market Report (OMR) was published 40 years ago, in September 1983. The international oil market complex has since grown exponentially. But then, as now, energy security concerns were critical. The IEA was created in response to the energy security challenges triggered by the 1973-1974 oil embargo when major producers pushed prices to historic levels. Launched to provide greater market transparency, the OMR has since become one of the world’s most authoritative sources for comprehensive analysis and timely statistics on oil market fundamentals, crucial to strengthening energy security globally.

Russia’s invasion of Ukraine in February 2022 upended oil and gas markets, creating the first truly global energy crisis amid the uneven economic recovery from the Covid-19 pandemic. Russia’s membership in the OPEC+ bloc has complicated efforts by the international community to navigate the crisis and address the major inflationary impacts of higher oil prices on economies around the world, especially in developing countries.

The Saudi-Russian alliance is proving a formidable challenge for oil markets. After oil prices traded in relative calm during August, with volatility at multi-year lows, the decision by Saudi Arabia and Russia in early September to extend output cuts of a combined 1.3 mb/d through year-end triggered a price spike in North Sea Dated above $90/bbl to a 10-month high. As forecast in this Report for some time, oil markets were already tightening and in August observed global inventories plunged by a sharp 76.3 mb, or 2.46 mb/d.

An expected rise in global oil demand of 1.5 mb/d in 2H23 over 1H23 levels will eclipse supply by 1.24 mb/d. Despite its difficult economic situation, China looks on track to account for 75% of the increase in world oil demand this year, or 1.6 mb/d of the 2.2 mb/d total. But global demand growth is set to slow sharply to around 1 mb/d in 2024 as the recovery runs out of steam and with efficiency gains, EV penetration and working from home further suppressing consumption.

Refiners are struggling to meet increased demand, especially for distillates. Surging product cracks and refinery margins near all-time highs have failed to spur a meaningful increase in throughputs. Sub-optimal crude allocations following embargoes on Russian crude and products and OPEC+ oil supply cuts have kept European and OECD Asian refinery runs well below year-earlier levels.

Output curbs by OPEC+ members of more than 2.5 mb/d since the start of 2023 have so far been offset by higher supplies from producers outside the alliance. Record US and Brazilian supply underpin a 1.9 mb/d increase in non-OPEC+ production from January to August, while Iran, still under sanctions, boosted output by around 600 kb/d. But from September onwards, the loss of OPEC+ production, led by Saudi Arabia, will drive a significant supply shortfall through the fourth quarter. Unwinding cuts at the start of 2024 would shift the balance to a surplus. However, oil stocks will be at uncomfortably low levels, increasing the risk of another surge in volatility that would be in the interest of neither producers nor consumers, given the fragile economic environment.

Source : IEA

August 2023

About this report

The IEA Oil Market Report (OMR) is one of the world’s most authoritative and timely sources of data, forecasts and analysis on the global oil market – including detailed statistics and commentary on oil supply, demand, inventories, prices and refining activity, as well as oil trade for IEA and selected non-IEA countries.

Highlights

• World oil demand is scaling record highs, boosted by strong summer air travel, increased oil use in power generation and surging Chinese petrochemical activity. Global oil demand is set to expand by 2.2 mb/d to 102.2 mb/d in 2023, with China accounting for more than 70% of growth. With the post-pandemic rebound running out of steam, and as lacklustre economic conditions, tighter efficiency standards and new electric vehicles weigh on use, growth is forecast to slow to 1 mb/d in 2024.
• Global oil supply plunged by 910 kb/d to 100.9 mb/d in July. A sharp reduction in Saudi production in July saw output from the OPEC+ bloc fall 1.2 mb/d to 50.7 mb/d, while non-OPEC+ volumes rose 310 kb/d to 50.2 mb/d. Global oil output is projected to expand by 1.5 mb/d to a record 101.5 mb/d in 2023, with the US driving non-OPEC+ gains of 1.9 mb/d. Next year, non-OPEC+ supply is also set to dominate world supply growth, up 1.3 mb/d while OPEC+ could add just 160 kb/d.
• Refinery throughputs are set to reach a summer peak of 83.9 mb/d in August, up 2.4 mb/d since May and 2.6 mb/d higher than a year ago. The increase in refined product output has failed to ease product market tightness, pushing gasoline and middle distillate cracks to near record-highs. High sulphur fuel oil cracks provided further support to margins, which pushed above 2022 levels in July.
• Russian oil exports held steady at around 7.3 mb/d in July, as a 200 kb/d decline in crude oil loadings was offset by higher product flows. Crude exports to China and India eased m-o-m but accounted for 80% of Russian shipments. Higher oil prices, combined with narrowing discounts for Russian grades, pushed estimated export revenues up by $2.5 bn to $15.3 bn, $4.1 bn below year-ago levels.
• Global observed oil inventories declined by 17.3 mb in June, led by the OECD. Non-OECD stocks and oil on water were largely unchanged. OECD industry stocks fell by 14.7 mb, in line with the seasonal trend, to 2 787 mb. Industry stocks were 115.4 mb below the five-year average, with product inventories particularly tight. Preliminary data suggest global inventories drew further in July and August.
• ICE Brent futures rallied by $11/bbl to $86/bbl in July as macroeconomic sentiment improved markedly with inflation easing. Tightening physical balances in the wake of Saudi output cuts and lower Russian loadings added additional momentum to the price rebound, pushing crude forward curves deeper into backwardation. At the time of writing, Brent traded around $87/bbl, close to 2023 highs.

Tightening up

Global oil prices moved steadily higher during July and into early August, reflecting a market tightening long projected by this Report. Deepening OPEC+ supply cuts have collided with improved macroeconomic sentiment and all-time high world oil demand. North Sea Dated rose by $10/bbl over the month to around $85/bbl, its highest since April. With output cuts hitting the heavy sour crude market hard, Dubai crude is trading at a rare premium to Brent, while the price of Urals crude has breached the G7-led price cap now making all Russian oil exports ineligible for G7 and EU maritime services.

In July, oil supply from the OPEC+ alliance fell by 1.2 mb/d to a near two-year low as a voluntary reduction from Saudi Arabia came into effect. At 50.7 mb/d, the bloc’s production was down more than 2 mb/d from the start of the year. Over the same period, producers outside the group ramped up output by 1.6 mb/d to 50.2 mb/d but limited non-OPEC+ gains are expected for the remainder of the year. The US, Brazil and Guyana lead the expansion, with exports from the trio rising by roughly 15% y-o-y to more than 9 mb/d in July, boosting the availability of light sweet grades in the Atlantic Basin. The US accounts for nearly 80% of global 2023 supply growth, or 1.2 mb/d of the 1.5 mb/d total. Next year, that share is set to slip as activity slows in the shale patch.

World oil demand hit a record 103 mb/d in June and August could see yet another peak. After months of lacklustre readings, OECD demand was revised up for May and June, with overall consumption returning to growth in 2Q23 after two quarters of contraction. Chinese demand was also stronger than expected, reaching fresh highs despite persistent concerns over the health of the economy. For the year, global oil demand looks on track to expand by 2.2 mb/d to 102.2 mb/d, its highest ever annual level. With the post-pandemic recovery having largely run its course and as the energy transition gathers pace, growth will slow to 1 mb/d in 2024.

Refiners are struggling to keep up with demand growth, as the shift to new feedstocks, outages and high temperatures have forced many operators to run at reduced rates. Tight gasoline and diesel markets have pushed margins to six-month highs. While naphtha remains under pressure, due to competition from cheap LPG and weak petrochemical activity outside of China, high-sulphur fuel oil has tightened significantly as refiners replace lost OPEC+ crude with lighter and sweeter grades. High sulphur fuel oil in Rotterdam rose above North Sea Dated for the first time in 28 years.

As a result, crude and products inventories have drawn sharply. In July, observed oil stocks decreased for a third consecutive month, with OECD industry stocks more than 100 mb below the five-year average. Market balances are set to tighten further into the autumn as Saudi Arabia and Russia extend supply cuts at least through September. An ample OPEC+ spare capacity cushion of 5.7 mb/d means there is significant scope for the alliance to raise output later in the year. Additional supplies of heavy sour crude would allow refiners to boost activity and help ease product market tensions. But if the bloc’s current targets are maintained, oil inventories could draw by 2.2 mb/d in 3Q23 and 1.2 mb/d in the fourth quarter, with a risk of driving prices still higher.

Source : IEA

July 2023

About this report

The IEA Oil Market Report (OMR) is one of the world’s most authoritative and timely sources of data, forecasts and analysis on the global oil market – including detailed statistics and commentary on oil supply, demand, inventories, prices and refining activity, as well as oil trade for IEA and selected non-IEA countries.

Highlights

• Global oil demand is projected to climb by 2.2 mb/d in 2023 to reach 102.1 mb/d, a new record. However, persistent macroeconomic headwinds, apparent in a deepening manufacturing slump, have led us to revise our 2023 growth estimate lower for the first time this year, by 220 kb/d. Buoyed by surging petrochemical use, China will account for 70% of global gains, while OECD consumption remains anaemic. Growth will slow to 1.1 mb/d in 2024.
• World oil supply rose 480 kb/d to 101.8 mb/d in June but is set to fall sharply this month as Saudi Arabia makes a sharp 1 mb/d voluntary output cut. For 2023, global production is forecast to increase by 1.6 mb/d to 101.5 mb/d, as non-OPEC+ expands by 1.9 mb/d. In 2024, global supply is set to rise by 1.2 mb/d to a new record of 102.8 mb/d, with non-OPEC+ accounting for all of the increase.
• Refinery crude throughput estimates for 2023 and 2024 have been raised by 130 kb/d and 90 kb/d, respectively, to 82.5 mb/d and 83.5 mb/d. Higher Russian crude runs and the start-up of new refining capacity underpin the revision. Refining margins remain robust, with very strong Atlantic Basin gasoline cracks and rapid gains in diesel, jet fuel and fuel oil more than offsetting weak naphtha cracks.
• Russian oil exports fell 600 kb/d to 7.3 mb/d in June, their lowest since March 2021. Estimated export revenues plunged by $1.5 bn to $11.8 bn – nearly half the levels of a year ago. Moscow has promised a further 500 kb/d cut to exports from August to stem declining prices and revenues, but may hold production steady as domestic oil demand rises seasonally.
• A substantial 44.2 mb build in non-OECD countries, led by a surge in China, pushed global observed oil inventories up by 19.4 mb in May to the highest since September 2021. By contrast, OECD oil stocks drew by a marginal 1.8 mb. Oil on water declined by 23 mb as additional OPEC+ output cuts saw seaborne oil exports falling to their lowest since January. Preliminary data show a 9.2 mb draw in June.
• Amid range-bound trading, ICE Brent futures fell by $1/bbl m-o-m in June to $75/bbl, as hawkish central bank policies continued to weigh on investor sentiment. Additional voluntary cuts by some OPEC members and a weaker US dollar failed to dispel the macro gloom. Asian crude benchmark Dubai outperformed WTI and Brent, as a tight East of Suez sour crude market contrasted sharply with a comfortably supplied Atlantic Basin. At the time of writing, Brent was trading around $78/bbl.

Running out of steam

Benchmark crude oil prices traded in a narrow range in June as persistent economic woes overshadowed deepening supply cuts from some OPEC+ countries. Amid an overall slackening in oil demand growth, China’s widely anticipated reopening has so far failed to extend beyond travel and services, with its economic recovery losing steam after the bounce earlier in the year. North Sea Dated hovered around $75/bbl for the month, marginally below May levels and a staggering $49/bbl less than a year ago. At the time of writing, the North Sea benchmark had inched up to $80/bbl. 

Lower production from Saudi Arabia and core OPEC+ members since production cuts were first implemented last November has so far been offset by higher output from other producers. In June, global oil supply was a mere 70 kb/d below October levels just before the first round of OPEC+ cuts kicked in. Iran, exempt from cuts due to sanctions, ramped up production by 530 kb/d over the same period, reaching a five-year high. At the same time, output recovered in Kazakhstan and Nigeria. Outside of the alliance, supply from the United States rose by 610 kb/d as natural gas liquids output surged to all-time highs while biofuels increased seasonally. But global supply could tumble by more than 1 mb/d this month as Riyadh implements steeper cuts. The Kingdom’s crude output is set to plunge to a two-year low of around 9 mb/d in July and August, leaving it trailing behind Russia as the bloc’s top crude producer. 

World oil demand is coming under pressure from the challenging economic environment, not least because of the dramatic tightening of monetary policy in many advanced and developing countries over the past twelve months. Growth in 2023 has been revised down for the first time this year, to 2.2 mb/d from 2.4 mb/d expected previously, with China poised to account for 70% of the total. While Chinese demand growth continues to surprise to the upside, a surge in domestic petrochemical activity has undermined steam cracker margins and activity elsewhere. Demand in the OECD, and Europe in particular, is languishing amid a grinding slowdown in industrial activity. African countries have seen imports and demand decline by higher retail fuel prices after subsidies were dismantled. Even so, global oil demand is set to rise seasonally by 1.6 mb/d from 2Q23 to 3Q23, and to average 102.1 mb/d for the year as whole. Growth will slow to 1.1 mb/d in 2024, as the recovery loses momentum and as ever-greater vehicle fleet electrification and efficiency measures take hold.

Global observed oil inventories look relatively comfortable, having recovered to their highest level since September 2021. OECD industry stocks rose by 170 kb/d in May. At the same time, China posted its largest monthly increase in crude stocks in a year, at a steep 1.1 mb/d, fuelled by a sharp rise in crude oil imports and despite near-record refinery throughput rates. China’s recent buying spree included heavily discounted Russian and Iranian barrels. Global oil balances imply a marginal stock build in 2Q23. But with the surplus mostly in Chinese crude and US LPG tanks, ongoing draws in oil on water and deeper supply cuts starting this month suggest the oil market may soon see renewed volatility.

Source : IEA

June 2023

About this report

The IEA Oil Market Report (OMR) is one of the world’s most authoritative and timely sources of data, forecasts and analysis on the global oil market – including detailed statistics and commentary on oil supply, demand, inventories, prices and refining activity, as well as oil trade for IEA and selected non-IEA countries.

Highlights

• World oil demand will grow by 2.4 mb/d in 2023 to 102.3 mb/d, a new record. China’s rebound continues unabated, with its oil demand reaching an all-time high of 16.3 mb/d in April. The non-OECD accounts for 90% of gains this year, as OECD demand remains lacklustre amid the current manufacturing slump. An increasingly adverse macroeconomic climate will act as a headwind in 2024, and as the post-pandemic recovery will largely have run its course, oil demand growth is set to slow to 860 kb/d.
• Non-OPEC+ leads world supply growth through next year, adding 1.9 mb/d in 2023 and 1.2 mb/d in 2024. As for OPEC+, total oil output in 2024 is set to decline by 200 kb/d as production curbs are carried through the year. Total oil supply is forecast to reach record high levels of 101.3 mb/d this year and 102.3 mb/d next year. In May, world oil supply fell by 660 kb/d to 100.6 mb/d after extra cuts from some OPEC+ producers kicked in. Saudi Arabia has promised to curb output by a further 1 mb/d in July.
• Russian oil exports dropped by 260 kb/d in May to 7.8 mb/d, largely unchanged from a year ago. Crude oil exports rose by 90 kb/d to 5.2 mb/d while product exports slumped by 350 kb/d to 2.6 mb/d. China and India accounted for at least 56% of total Russian exports, while shipments to Africa, the Middle East and Latin America made up another 12%. Estimated export revenues fell by $1.4 bn to $13.3 bn, down 36% on a year ago, with average crude prices easing from $60/bbl in April to $55/bbl in May.
• Global refinery throughputs are forecast to increase by 1.8 mb/d in 2023 and 1 mb/d next year when it averages 83.4 mb/d. A further decline in OECD crude runs next year is more than offset by the 1.3 mb/d increase in non-OECD activity. New capacity in Oman and Kuwait and ample availability of discounted Russian crude in Asia skews activity away from the Atlantic Basin. Refinery margins were stable in May, with gains in Atlantic Basin light distillates partially offset by weaker middle distillates.
• Global observed oil inventories rose by 10 mb in April as a 15.9 mb decline in oil on water and a 1.1 mb drop in non-OECD stocks partly offset a 27 mb build in OECD stocks. OECD industry stocks rose by 33.6 mb but were still 86.4 mb lower than the five-year average. Preliminary May data show a further stock build in OECD countries of 21.1 mb.
• North Sea Dated fell by around 10% in May compared with April amid growing concerns about the impact of hawkish central bank policies on the global economy. Attesting to oil’s bear market, the current ICE Brent future price of around $73/bbl is $50/bbl below summer 2022’s peak. Saudi Arabia’s announcement of deeper output cuts in early June was unable to stem the decline.

Mixed Signals

Oil markets are struggling for direction as conflicting data points cloud the outlook. Bearish macroeconomic indicators and concerns over demand growth are clashing with resurgent oil use in key consuming countries. Oil prices appear to be taking their cue from the former, with benchmark North Sea Dated trading at $73/bbl – nearly half the high of 2022 – despite a looming supply deficit.

Global oil demand continues to defy the challenging macroeconomic climate and is set to rise by 2.4 mb/d in 2023, outpacing last year’s 2.3 mb/d increase as well as earlier expectations. China accounts for 60% of the gains, with soaring transport and petrochemical use propelling apparent demand in April to an all-time high of 16.3 mb/d. Indian demand is equally robust with the latest readings for May showing both gasoline and diesel breaking records.

By contrast, OECD demand remains lacklustre amid an ongoing manufacturing slump and generally subdued economic growth. Having spent 4Q22 and 1Q23 in contraction, the OECD returns to muted growth in 2Q23, with the US driving season getting off to a strong start. In advanced and developing economies alike, rebounding air traffic is consolidating jet/kerosene’s position as the main contributor to global 2023 demand gains (1.1 mb/d).

While oil demand is expected to continue to rise, both seasonally and structurally over the remainder of the year, only a marginal increase in supply is foreseen. In May, world oil production fell by 660 kb/d to 100.6 mb/d. Deeper cuts from some OPEC+ producers kicked in while output from Iraq’s northern Kurdish region and some Canadian oil sands remained shut in. Saudi Arabia, with its voluntary cut of 500 kb/d agreed in April, led the monthly drop in world supply, but the overall decline was stemmed by a seasonal 330 kb/d rise in biofuels along with higher flows from Nigeria and elsewhere. The Kingdom has promised to slash output by a further 1 mb/d in July to a two-year low of 9 mb/d. Riyadh made the pledge at the 4 June OPEC+ meeting that rolled over the bloc’s existing curbs through 2024 and readjusted some targets to better reflect actual supply.

With the post-Covid rebound having largely run its course, global demand growth is set to decelerate to 860 kb/d next year. The impact of the unprecedented monetary policy tightening can further curtail activity and limit advanced economies to a second year of subpar growth in 2024. Combined with improved vehicle efficiencies and widespread teleworking, this will push OECD deliveries into decline. Conversely, non-OECD oil use will continue to expand. On a global level, petrochemical feedstocks will replace jet fuel as the main driver, accounting for half of the total gain.

Supply growth, too, is forecast to lose momentum next year – rising 1 mb/d compared to 1.4 mb/d in 2023. The United States continues to dominate non-OPEC+ supply increases, but gains are set to ease from 1.9 mb/d to 1.2 mb/d in 2024 as growth halves in the US shale patch. While the adjustments to individual OPEC+ member targets will not materially impact production this year, the extension of quotas through 2024 means that, following a 470 kb/d decrease this year, OPEC+ output could fall a further 200 kb/d next year. Altogether, this could leave the market in deficit in 2024, with the second half looking particularly tight. 

Source : IEA

Fuel Report – April 2023

About this report

The IEA Oil Market Report (OMR) is one of the world’s most authoritative and timely sources of data, forecasts and analysis on the global oil market – including detailed statistics and commentary on oil supply, demand, inventories, prices and refining activity, as well as oil trade for IEA and selected non-IEA countries.

Highlights

• World oil demand will climb by 2 mb/d in 2023 to a record 101.9 mb/d. Reflecting the widening disparity between regions, non-OECD countries, buoyed by a resurgent China, will account for 90% of growth. OECD demand, dragged down by weak industrial activity and warm weather, contracted by 390 kb/d y-o-y in 1Q23, its second consecutive quarter of decline. Jet/kerosene accounts for 57% of 2023 gains.
• Extra cuts by OPEC+ will push world oil supply down 400 kb/d by end-2023. From March-December, gains of 1 mb/d from non-OPEC+ fail to offset a 1.4 mb/d decline from the producer bloc. For the year as a whole, global oil production growth slows to 1.2 mb/d versus 4.6 mb/d in 2022. Non-OPEC+, led by the US and Brazil, drives the 2023 expansion, rising 1.9 mb/d. OPEC+ is expected to drop by 760 kb/d.
• Global refining throughput is forecast to average 82 mb/d this year, 0.1 mb/d lower than in last month’s Report due to weaker 1Q23 data. Annual gains will double to 2.1 mb/d from 1Q23 to 2Q23, as runs in the US normalise and with Chinese activity materially higher than a weak 2Q22 baseline. On average, 2023 crude runs will approach pre-covid levels but remain 0.3 mb/d below 2019 average throughputs.
• Russian oil exports in March soared to the highest since April 2020 thanks to surging product flows that returned to levels last seen before Russia invaded Ukraine. Total oil shipments rose by 0.6 mb/d to 8.1 mb/d, with products climbing 450 kb/d m-o-m to 3.1 mb/d. Estimated oil export revenues rebounded by $1 billion to $12.7 billion but were 43% lower than a year ago.
• Global inventories held largely steady in February after surging by 58 mb in the previous month. Oil on water and non-OECD stocks fell by 11.5 mb and 2.1 mb, respectively, while total OECD inventories rose by 8.8 mb. OECD commercial stocks built by 9.6 mb, narrowing the deficit against the five-year average to 7.5 mb. Preliminary data for the US, Europe and Japan show a hefty 38.9 mb decline in March.
• ICE Brent oil futures slumped to a 15-month low of $71/bbl in mid-March due to financial market instability but then recovered as banking stress waned and expectations of Federal Reserve interest rate cuts later this year increased. Surprise OPEC+ production cuts announced in early April added further momentum to the rebound. At the time of writing, Brent futures traded at $87/bbl.

Mind the gap

Surprise OPEC+ supply cuts announced on 2 April risk aggravating an expected oil supply deficit in 2H23 and boosting oil prices at a time of heightened economic uncertainty, even as industrial activity slows in the world’s largest economies and production growth outside the alliance appears robust. The bloc’s self-described “precautionary move” immediately triggered a $7/bbl jump in North Sea Dated crude to $85/bbl, up nearly $15/bbl from March lows.

The apparent weakness in industrial activity is impacting gasoil demand, whereas the services sector and personal consumption are driving gasoline and jet uptake. While gasoil cracks have eased, those for gasoline continue to trend higher. Consumers confronted by inflated prices for basic necessities will now have to spread their budgets even more thinly. This augurs badly for the economic recovery and growth.

The latest OPEC+ voluntary curbs of 1.16 mb/d come on top of an announced 500 kb/d cut in Russian output from March that has now been extended through the rest of the year, and a 2 mb/d reduction in targets taking effect last November. While apparently a move to support declining prices amid financial turmoil in mid-March, rising global oil stocks may have also contributed to the decision. In January, OECD industry stocks surged by 53 mb to 2 830 mb, the highest since July 2021 and only 47 mb below the five-year average. Preliminary data for February show further builds, albeit at a much slower pace. By March, however, the trend was already turning, with OECD industry stocks plunging by 39 mb – their biggest monthly decline in over a year.

While oil demand in developed nations has underwhelmed in recent months, slowed by warmer weather and sluggish industrial activity, robust gains in China and other non-OECD countries are providing a strong offset. In 1Q23, OECD oil demand fell 390 kb/d y-o-y, but a solid Chinese rebound lifted global oil demand 810 kb/d above year-earlier levels to 100.4 mb/d. A much stronger increase of 2.7 mb/d is expected through year-end, propelled by a continued recovery in China and international travel. For 2023 as a whole, world oil demand is forecast to rise by an average 2 mb/d, to 101.9 mb/d, with the non-OECD accounting for 87% of the growth and China alone making up more than half the global increase.

Meeting those gains may prove challenging as the new OPEC+ cuts could reduce output by 1.4 mb/d from March through year-end, more than offsetting a 1 mb/d increase in non-OPEC+ production. Growth from the US shale patch, traditionally the most price-responsive source of more output, is currently limited by supply chain bottlenecks and higher costs.

Our oil market balances were already set to tighten in the second half of 2023, with the potential for a substantial supply deficit to emerge. The latest cuts risk exacerbating those strains, pushing both crude and product prices higher. Consumers currently under siege from inflation will suffer even more from higher prices, especially in emerging and developing economies. 

Source : IEA

Fuel Report – March 2023

About this report

The IEA Oil Market Report (OMR) is one of the world’s most authoritative and timely sources of data, forecasts and analysis on the global oil market – including detailed statistics and commentary on oil supply, demand, inventories, prices and refining activity, as well as oil trade for IEA and selected non-IEA countries.

Highlights

• Following an 80 kb/d contraction in 4Q22, world oil demand growth is set to accelerate sharply over the course of 2023, from 710 kb/d in 1Q23 to 2.6 mb/d in 4Q23. Average annual growth is forecast to ease from 2.3 mb/d in 2022 to 2 mb/d, and global oil demand to reach a record 102 mb/d. Rebounding air traffic and the release of pent-up Chinese demand dominate the recovery.

• World oil supply leapt 830 kb/d in February to 101.5 mb/d as the US and Canada rebounded strongly from winter storms and other outages. We expect non-OPEC+ to drive global output growth of 1.6 mb/d this year, enough to meet demand in 1H23 but falling short in the second half when seasonal trends and China’s recovery are set to boost demand to record levels.

• Global refinery throughputs reached a seasonal low in February at 81.1 mb/d, as the muted recovery in the US merged with the start of planned seasonal maintenance elsewhere. Despite the collapse in middle distillate cracks, refining margins remain healthy, especially for those running discounted Russian crude and feedstocks. We expect 2023 runs to average 82.1 mbd, up 1.8 mbd y-o-y.

• Russian oil exports fell by 500 kb/d to 7.5 mb/d in February as the EU embargo on refined oil products came into force. Shipments to the EU fell by 800 kb/d to 600 kb/d, compared with more than 4 mb/d at the start of 2022. Sailings to China and India also fell, while cargoes without a destination surged by 600 kb/d to 800 kb/d. Export revenues plunged another $2.7 bn to $11.6 bn, down 42% on a year-ago.

• Global observed inventories surged by 52.9 mb in January, following builds in both the OECD (+57.1 mb) and non-OECD (+13 mb) and a decline in oil on water (-17.2 mb). OECD industry oil stocks rose by 54.8 mb, four times the five-year average build. At 2 851 mb, stocks reached an 18-month high. Preliminary data for the US, Europe and Japan show a 7.8 mb increase in industry stocks in February.

• In range-bound trading, crude oil futures fell by about $1/bbl m-o-m in February as optimism surrounding China’s reopening faded in the face of the hawkish drift in central bank policy. WTI continued to slump in physical differentials amid ongoing US crude stock builds. Prices fell a further $3/bbl in March as macroeconomic worries escalated following the collapse of Silicon Valley Bank.

Uncharted Waters

The market is caught in the cross-currents of supply outstripping still-lacklustre demand, with stocks building to levels not seen in 18 months. Much of the supply overhang reflects ample Russian barrels racing to re-route to new destinations under the full force of EU embargoes. Despite the increasing dislocation in global trade, the rising stock cover has held the Brent crude oil futures in a relatively narrow $80-85/bbl range since the start of the year.

A 52.9 mb January surge in global inventories lifted known stocks to nearly 7.8 billion barrels, their highest level since September 2021 and preliminary indicators for February suggest further builds. Despite solid Asian demand growth, the market has been in surplus for three straight quarters.

While Russian oil production remained near pre-war levels in February, Russia’s exports to world markets fell by more than 500 kb/d to 7.5 mb/d. Shipments to the EU plunged by 760 kb/d to just 580 kb/d. Over the past year, 4.5 mb/d of Russian oil previously going to the EU, North America and OECD Asia Oceania has had to find alternative outlets. Willing buyers in Asia, namely India and, to a lesser extent, China, have snapped up discounted crude oil cargoes, but increasing volumes on the water suggest the share of Russian oil in their import mix may be getting too big for comfort. Russia accounted for around 40% and 20% of Indian and Chinese crude imports, respectively, in February. The two countries took in more than 70% of Russia’s crude exports last month.

While Russian crude oil shipments are almost exclusively heading to Asia, a more diverse set of buyers for products backed out of the EU is emerging. In February, Russian product exports to the EU and its G7 allies slumped by nearly 2 mb/d versus pre-war levels. At the same time, exports to Asia grew by less than 300 kb/d. Shipments to Africa, Türkiye and the Middle East rose by 300 kb/d, 240 kb/d and 175 kb/d, respectively, while Latin America received roughly the same as before the war. The lack of buyers saw oil pile up on the water and product exports drop by 650 kb/d y-o-y.

t remains to be seen if there will be sufficient appetite for Russian oil products now that the price cap is in place or if its production will start to fall under the weight of sanctions. Revenues are already dwindling. In February, Russia’s estimated oil export revenues fell to $11.6 bn – a $2.7 bn decline from January when volumes were significantly higher, and nearly half pre-war levels. Russian fiscal receipts from oil sales were up 22% from January after export taxation rules were adjusted, but at $6.9 bn, just 45% of the level from a year earlier, according to the Russian finance ministry.

At least for this month, Moscow has signalled it will cut output by 500 kb/d. Even so, world oil supply should comfortably exceed demand in the first half of the year. Building stocks today will ease tensions as the market swings into deficit during the second half of the year when China is expected to drive world oil demand to record levels. Global demand is set to surge by 3.2 mb/d from 1Q23 to 4Q23, taking average growth for the year to 2 mb/d. Matching that increase would be a challenge even if Russia were able to maintain production at pre-war levels.