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World oil demand dropped in April to 97 percent of the 2019 level as demand in Asia weakened, according to data from the Joint Organisations Data Initiative (JODI) cited by Reuters.
Weaker oil demand in China amid weeks-long strict lockdowns in Shanghai spooked the oil market in April and most of May as the Chinese “zero COVID” policy resulted in mass testing and lockdowns in the Chinese financial center that is home to 26 million residents.
Global commercial oil stocks increased in April after months of continuous falls, but they were still below the five-year average for this time of the year.
Following nearly two years of declines, observed global oil stocks increased by 77 million barrels in April, the International Energy Agency (IEA) said in its latest Oil Market Report last week. OECD industry stocks also rose, by 42.5 million barrels, or 1.42 million bpd, in April, helped by government stock releases of nearly 1 million bpd. However, OECD industry stocks were 290.3 million barrels below the 2017-2021 average, the IEA said. According to preliminary data for May, total OECD stocks increased by 6 million barrels last month, the agency added.
Still, the IEA expects in its first outlook for 2023 that oil demand will accelerate next year, with global demand averaging a record 101.6 million barrels per day (bpd) and exceeding pre-COVID levels.
“While higher prices and a weaker economic outlook are moderating consumption increases, a resurgent China will drive gains next year, with growth accelerating from 1.8 mb/d in 2022 to 2.2 mb/d in 2023,” the IEA said in its closely-watched Oil Market Report for June.
Next year, global oil supply may even struggle to catch up with demand, the agency said, as sanctions on Russia would curtail more supply when they officially enter into force at the end of this year.
“Global oil supply may struggle to keep pace with demand next year, as tighter sanctions force Russia to shut in more wells and a number of producers bump up against capacity constraints,” the IEA said last week.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com