20220630-IEA-Oil_Market_Report_-_July_2022_83页_2mb

Oil Market Report Summary - 13 July 2022

Core Content

The oil market in 2022 is marked by a delicate balance between declining demand and increasing supply, amid a deteriorating global economic environment and geopolitical tensions. Despite challenges, certain regions and products are showing resilience, while others face significant headwinds.

Main Points

• Oil Demand:

  • Global oil demand growth is projected to be 1.7 mb/d in 2022 and 2.1 mb/d in 2023, reaching 101.3 mb/d.
  • OECD oil demand fell by 1.6 mb/d in April, with a notable decline in road fuels. This is attributed to high fuel prices and weakening consumer confidence.
  • Non-OECD countries, especially China, are offsetting some of the demand decline, driven by the recovery from lockdowns and increased power generation needs.
  • Naphtha demand is expected to fall by 220 kb/d in 2022 due to reduced petrochemical activity, higher crude prices, and inter-product competition.

• Oil Supply:

  • Global oil supply increased by 690 kb/d in June to 99.5 mb/d, with Russia and US/Canada leading the growth.
  • Supply is expected to rise by 1.8 mb/d by year-end, reaching 101.3 mb/d.
  • OPEC+ continues to maintain production cuts, while Russia is expected to increase output in the coming months.

• Refining:

  • Refinery throughputs rose by 500 kb/d in June to 79.2 mb/d, 1.2 mb/d above 2021 levels.
  • Product cracks fell to historically low levels, despite a seasonal increase in demand, due to tight spare capacity and supply constraints.

• Prices:

  • Benchmark crude oil futures dropped by over $20 / bbl in June, with Brent below $100 / bbl and WTI at around $96 / bbl.
  • Russian oil exports fell by 250 kb/d in June, the lowest since August 2021, but export revenues increased by $700 million due to higher prices.
  • Naphtha cracks have declined significantly, with Russian naphtha exports recovering slightly as China's economy reopened.

• Inventories:

  • Global oil inventories remain critically low, with OECD industry stocks still 301.3 mb below the 2017-2021 average.
  • OECD stocks increased by 15.2 mb in May, aided by government stock releases, but remain below the five-year average.

• Economic Outlook:

  • World Bank forecasts global GDP growth to ease to 2.9% in 2022 from 5.7% in 2021.
  • IMF warns of the possibility of a recession in 2023 due to elevated risks.
  • China's economic recovery is a key factor in the demand outlook, with a Caixin Manufacturing PMI at 51.7 in June, a four-month high.

Key Information

• OECD Demand:

  • The OECD Americas saw a 670 kb/d decline in April, with US demand falling by -130 kb/d and gasoline by -190 kb/d.
  • Canada and Mexico showed robust demand in April, helping to mitigate the overall decline.
  • The OECD Europe demand fell by 250 kb/d in April, with gasoil being the primary factor. However, jet/kerosene demand continued to grow.

• Non-OECD Demand:

  • China and the Middle East led the rebound in non-OECD demand, especially in May and June.
  • Jet fuel and kerosene demand in the OECD showed the largest y-o-y growth rate at 24% in 2022.

• Market Risks:

  • The market is walking a tightrope between supply constraints and demand volatility.
  • OECD oil demand is expected to remain modestly trimmed for 2022 and 2023 due to economic headwinds.
  • High fuel prices are impacting consumption, particularly in OECD regions, while non-OECD demand is supported by economic recovery and power generation needs.

• Policy and Outlook:

  • Government stock releases have helped OECD industry stocks recover slightly, but spare capacity is still a concern.
  • OPEC+ is expected to meet on 3 August to discuss future strategies.
  • Russia's continued export of oil despite sanctions and China's reopening are key factors influencing the market.

Conclusion

The oil market is navigating a complex landscape of economic uncertainty, geopolitical tensions, and supply-demand imbalances. While non-OECD demand is showing resilience, OECD demand remains under pressure from high prices and weakening economic conditions. The future of the market will be heavily influenced by China's recovery, OPEC+'s production decisions, and global economic trends.