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Global oil demand is expected to average 99.4 million barrels per day (bpd) this year, the International Energy Agency (IEA) said on Wednesday, cutting its 2022 demand outlook by 260,000 bpd to reflect the return of severe lockdowns in the world’s top oil importer, China.
The strict lockdown measures in China—where authorities continue with their “zero-COVID” policy locking down 26 million residents in the financial hub Shanghai—led to lower expectations of oil demand in the second quarter of 2022 and the full year as a whole, the IEA said in its monthly Oil Market Report for April.
On Tuesday, OPEC also slashed its oil demand growth estimate for 2022 by nearly 500,000 bpd on the back of lower expected global economic growth with the Russian war in Ukraine and the return of COVID lockdowns in China.
Unlike in last month’s report, when the IEA warned of massive deficits in oil supply, the IEA now says that “lower demand expectations, steady output increases from OPEC+ members along with the US and other non OPEC+ countries, and massive stock releases from IEA member countries should prevent a sharp deficit from developing.”
Global inventories continued to draw down in February, with OECD industry stocks falling by another 42.2 million barrels to 2.611 billion barrels in February, nearly double the seasonal trend. Preliminary data show a build in OECD industry stocks of 8.8 million barrels for March, per the IEA estimates.
The Paris-based agency also sees growing shut-ins in Russian oil production. Russian oil supply is expected to fall by 1.5 million bpd in April as Russian refiners extend run cuts, more buyers shun barrels, and Russian storage fills up.
“From May onwards, close to 3 mb/d of Russian production could be offline due to international sanctions and as the impact of a widening customer-driven embargo comes into full force,” the IEA said.
The agency noted that the massive release of stockpiles from the U.S. and IEA allies is a “welcome relief to an already tight oil market that’s facing heightened uncertainty amid the multitude of repercussions stemming from sanctions and embargoes targeted at Russia by the international community and consumer boycotts.”
According to IEA’s estimates of OPEC+ supply, the alliance’s 19 members with quotas collectively increased oil production by just 40,000 bpd in March, compared to the 400,000 bpd planned increase. OPEC+ was pumping 1.5 million bpd below its target in March, said the IEA, which was ditched by OPEC at its latest meeting as a secondary source provider to assess production.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.