After a counter-seasonal drop in July, global oil demand rebounded in August by 2 million barrels per day (bpd) to reach 99 percent of pre-Covid levels, data from the Joint Organizations Data Initiative (JODI) showed on Monday.
Oil demand growth in August was driven by higher consumption in the United States, China, Japan, Saudi Arabia, and Indonesia, the Riyadh-based International Energy Forum (IEF) said, citing the latest JODI data.
Of note in August was also a 500,000 bpd increase in global crude oil output, with Saudi Arabia’s production rising above 11 million bpd - only the third time the Kingdom has reported output of over 11 million bpd, according to the JODI database which compiles self-reported figures from countries.
In the United States, crude oil production rose by 290,000 bpd in August and is up by 813,000 bpd from year-ago levels, the data showed. Product demand rose by 1.46 million bpd in August, and U.S. crude oil closing stocks dropped by 22.7 million barrels to their second-lowest level recorded in JODI.
The August rebound in global demand follows an estimated 1.1 million bpd drop in July, which was an unusual slump for this time of the year.
Demand for August may have rebounded, but the oil market and oil analysts say that the ongoing economic slowdown and looming recessions could limit demand growth in the near term.
Supply will also be constrained more than previously expected after the OPEC+ group announced early this month the biggest cut to its target production level since 2020. Despite the headline cut of 2 million bpd, the actual reduction from current OPEC+ oil production would be half that figure, at around 1 million bpd-1.1 million bpd. That’s because many producers haven’t been able to produce to their quotas for months.
The alliance’s decision to cut oil supply as of November increases energy security risks worldwide and could lead to higher oil prices that could be the tipping point for a global recession, the International Energy Agency (IEA) warned last week. The agency cut its demand growth estimates for this year and next and said that “The still relatively robust headline figure masks a sharp slowdown underway, with demand now forecast to contract by 340 kb/d y-o-y in 4Q22, despite increased gas-to-oil switching in power generation and industry.”
By Tsvetana Paraskova for Oilprice.com
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