Global oil demand growth continues to slow, weighed down by fresh lockdowns in China and an ongoing slowdown in the OECD, according to the International Energy Agency (IEA)  in its latest monthly oil market report.

However, this is partially offset by a large-scale shift from gas to oil, which is estimated to average 700,000 b/d in Q4 2022 and Q1 2023, double the year-earlier rate. Global oil demand is forecast to grow 2 million b/d in 2022 and 2.1 million b/d in 2023, slightly less than  last month’s report.

Brent crude  futures fell below $90/bbl in early September, the lowest level since January, and more than $34/bbl below the June high. This is the largest 90-day decline from March-April 2020 and was broken only  by market trades in 2014-15 and 2008-09 prior to 2020. However, the markets for diesel and aviation fuel  remain extremely tight, which is reflected in the current prices. Sentiment of . However, global oil demand is forecast to grow by 2 million barrels per day and 2 million barrels per day in 2022.1 million b/d next year.

Kerosene dominates growth while truck demand falls. Heavy use of oil  for power generation in the Middle East and  Europe due to record natural gas and power prices provides additional support,” the IEA said. At the same time, more oil is entering the market. IEA member countries released almost 180 million barrels of government measures from March to August, with another 52 million barrels planned for the next 2 months.

OIL SUPPLY

In addition, Global oil supply rose by 790,000 barrels per day to 101.3 million barrels per day in August, up from 5 million barrels per day a year ago. Russia’s oil production and exports have proved resilient, with August readings just 400-450k b/d below pre-war levels. Despite a 2 million barrel-per-day drop in shipments of crude oil and oil products from Russia to Europe, the US, China and others have moderated upstream losses.

However, the EU embargo on  imports of Russian crude oil and products, set to take effect in December 2022 and February 2023 respectively, is expected to cause deeper declines, the IEA said.”An additional  million b/d of product and 1.4 million b/d of crude oil must find a new home. An EU ban on maritime services could force further relocations from third countries that disagree with the price cap proposed by the G7. Russia’s total oil production is forecast to fall to 9.5 million barrels per day by February 2023.

• A drop of 9 million barrels per day compared to February 2022. These losses would still leave the market with an oversupply of almost 1 million barrels per day in the second half of 2022 and more or less balanced in 2023 “, the IEA said.

“But product markets, particularly diesel, are expected to remain tight due to downstream capacity constraints outside of China. Global diesel markets have tightened this year, demand has been robust and lower Chinese export quotas have severely limited overseas sales.

OIL IMPORTS

More recently, new taxes introduced in India have deterred exports from Asia’s largest supplier. So far the EU has largely left Russian diesel import volumes at around 600,000 b/d, but from next February 1 these volumes will have to be replaced by other sources.

Three major refinery projects in Kuwait, Nigeria and Mexico, scheduled to come online in late 2023, will eventually increase the global availability of diesel. The proposed price cap mechanism should also ensure that the total supply of diesel to the world market is covered, And allowing European importers to switch to flows from the US, the Middle East and India.

Otherwise, and assuming Russia is unable to ship diesel in significant quantities outside the price cap, European, Latin American and African importers could compete for a much smaller pool of available flows,” the IEA said.

Observed global inventories have fallen by 25.6 million barrels in July on a decline in China crude and oil in the water and IEA government inventories. Average to 274.9 million barrels. – SHREEMETALPRICES