IEA Lowers Q2 Oil Demand Forecast, Projects 1.5m bpd Russia Supply Loss

Emmanuel Addeh

The International Energy Agency  (IEA) has revised down the global demand for crude oil for the second quarter of this year amid severe Covid-19 lockdowns in China, a major consumer of the commodity.

Stressing this in its Oil Market Report (OMR) for April 2022, the organisation further noted that on the back of the consequences of its war with Ukraine, Russia’s supply to the market will reduce by 1.5 million bpd at the end of the month.

“Severe new lockdown measures amid surging Covid-19 cases in China have led to a downward revision in our expectations for global oil demand in 2Q22 and for the year as a whole. 

“As a result, our estimate for global oil demand has been lowered by 260 kb/d for the year versus last month’s report, and demand is now expected to average 99.4 mb/d in 2022, up by 1.9 mb/d from 2021,” the report said.

Global oil supply rose in March by 450 kb/d to 99.1 mb/d, led by non-members of the Organisation of Petroleum Exporting Countries known as (OPEC+), the IEA report added.

 “Russian oil supply is expected to fall by 1.5 mb/d in April, with shut-ins projected to accelerate to around 3 mb/d from May.

“Despite the disruption to Russian oil supplies, 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,” it advised.

The document added that global oil inventories have decreased for 14 consecutive months, with February stocks 714 mb below the end-2020 level and rich countries accounting for 70 per cent of the decline. 

The report stated that although benchmark crude prices are now back to near pre-invasion levels, but they remain troublingly high and are a serious threat for the global economic outlook.

It pointed out that oil markets struggling to navigate supply losses and dislocations stemming from Russia’s invasion of Ukraine received much needed support from US and IEA coordinated stock releases. 

IEA member countries had agreed on 1 April to tap their emergency reserves for the second time in the space of a month, this time to the tune of 120 mb.

 The record volumes, it noted, will provide 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. 

Insisting that no supply shortage exists, OPEC+ countries agreed on 31 March to stick with a modest monthly output increment for May. In March, output from the alliance’s 19 members with quotas was up by a mere 40 kb/d, far below the planned 400 kb/d increase, and 1.5 mb/d below their target.