Russia’s isolation following its invasion of Ukraine is deepening as the European Union and G7 nations contemplate tougher sanctions that include a full phase-out of oil imports from Russia. If agreed, these new embargoes would accelerate the reorientation of trade flows that is already underway and force Russian oil companies to shut down more oil wells, according to the latest Oil Market Report from the International Energy Agency. Following a supply decline of nearly 1 million barrels a day in April, losses could expand to around 3 million barrels a day during the second half of the year.
Nevertheless steadily rising output elsewhere, coupled with slower demand growth, especially in China, is expected to fend off an acute supply deficit in the near term as countries around the world contend with an evolving global energy crisis.
The IEA’s Oil Market Report forecasts and analyses 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.
The latest report shows that:
- World oil demand growth is forecast to slow to 1.9 mb/d in 2Q22 from 4.4 mb/d in 1Q22 and is now projected to ease to 490 kb/d on average in the second half of the year on a more tempered economic expansion and higher prices. As summer driving escalates and jet fuel continues to recover, world oil demand is set to rise by 3.6 mb/d from April to August. For 2022, demand is expected to increase by 1.8 mb/d on average to 99.4 mb/d.
- Russia shut in nearly 1 mb/d in April, driving down world oil supply by 710 kb/d to 98.1 mb/d.
- Global refinery margins have surged to extraordinarily high levels due to depleted product inventories and constrained refinery activity. Throughputs in April fell 1.4 mb/d to 78 mb/d, the lowest since May 2021, largely driven by China. Between now and August, runs are forecast to ramp up by 4.7 mb/d, but the tightness in product markets is expected to continue.
- Global observed oil inventories declined by a further 45 mb during March and are now a total 1.2 billion barrels lower since June 2020.
- Crude prices fell in April to trade in a narrow $10/bbl range above $100/bbl. ICE Brent last traded around $105/bbl and WTI at $102/bbl. Rapid early-May advances on the sixth round of EU sanctions for Russia drove renewed price tensions.