(Montel) Global oil demand recovery to shift oversupply balance – IEA

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Global oil supply is expected to exceed demand in the first six months of the year but the balance could rapidly shift as demand recovers, the International Energy Agency (IEA) said on Wednesday.

World oil supply was set to grow 1.2m bbl/day year on year in 2023, while demand should rise by 2m bbl/day to hit a record 101.9m bbl/day, 1.4m bbl/day more than the 2019 average, it added in its latest monthly report.

“World oil supply looks set to exceed demand through the first half of 2023 but the balance could quickly shift to deficit as demand recovers and some Russian output is shut in.”

Market observers had previously cited the reopening of China – the world’s largest crude importer – following the Covid-19 pandemic as a key oil market demand driver this year.

Meanwhile, Russia said this month it planned to cut by 500,000 bbl/day in production in response to Western sanctions “in a sign that Moscow may be struggling to place all of its barrels”, the IEA said, citing the EU embargo and price cap as another “key factor” behind demand growth.

“The cut may be an attempt to shore up oil prices,” it added, flagging up the fact Russia’s fiscal revenues from oil operations had tumbled by 48% year on year in January.

More supply?

“If the price cap on products is half as successful as the crude cap, product markets may well weather the storm – but more crude supplies would be required to prevent renewed stock draws later in the year,” the IEA said.

The agency also predicted in its report that a further drop in global refinery throughputs was expected in February on scheduled maintenance.

In its latest monthly report released yesterday, producer cartel Opec made a slight upward revision of 0.1m bbl/day in its global oil demand forecast for the year to 2.3m bbl/day.

“Crude oil futures prices bounced back in January… as market sentiment turned positive on optimism about easing Covid-19 restrictions and the reopening of the Chinese economy, raising hopes of a strong economic and oil demand recovery,” said Opec.