…IEA members to release182.7 million barrels of oil from emergency stocks over six months.
Global oil demand will drop by 1.4 million barrels per day, according to the latest forecast by Rystad Energy on Friday cited by the National.
The 1.4 million bpd loss would sink oil demand to 99.6 million bpd on average, below 2019 levels of 100.2 million bpd. And a rebound in this demand isn’t expected to happy until next year at the soonest, Rystead said.
The drop in oil demand will likely come from the Russian invasion of Ukraine, soaring inflation, China’s covid-inspired lockdowns, and supply chain disruptions. And even more oil demand pressure could be applied through future lockdowns or geopolitical issues.
“Shrinking demand is a direct result of the impact of lower economic activity globally,” the consultancy said, adding that such a demand decrease could ease today’s tight oil markets, calming oil prices.
Rystad isn’t the only one lowering oil demand forecasts. OPEC cut its 2022 oil demand growth forecast by 480,000 bpd on the back of lower expected global economic growth given the war in Ukraine and China’s covid lockdowns.
The IEA also cut its oil demand forecast by 260,000 bpd to reflect the return of severe covid lockdowns in China.
Meanwhile, the World Bank and the IMF have both cut their overall global growth expectations for this year.
But Rystad isn’t changing its outlook for bullish oil prices. According to Rystad, if the Russian war in Ukraine drags on, it will increase oil and gas prices, particularly if the EU ends up banning oil and gas this year.
“The Russian war worst case for oil demand is premised on Brent prices reaching $180 per barrel in the fourth quarter, triggering a further economic slowdown and outright destruction of oil demand,” Rystad said.
Member countries of the International Energy Agency will be releasing a total of 182.7 million barrels of oil from emergency stocks over six months, of which 74 percent will come from public stocks and the remaining 26 percent from lowering of national stockholding obligations set on industry, the IEA said on Friday in an update on the oil stocks release.
Since the Russian invasion of Ukraine, the IEA members, including the United States, have announced releases from Strategic Petroleum Reserves (SPRs) to try to tame soaring oil and gasoline prices and offset the gap that unwanted Russian oil due to sanctions of self-sanctioning would leave.
IEA members announced in early April they would release an additional 120 million barrels from their emergency oil stocks over a six-month period. The collective action, the largest in IEA history, comes on top of the 62.7 million barrels release agreed upon in March. A total of 60 million barrels of the latest IEA release of 120 million has already been accounted for as part of the 180 million barrel SPR release that the United States announced at the end of March.
Of the 182.7 million barrels, nearly 50 million barrels is in the form of oil products, the IEA said today. Oil products account for 27 percent of the stocks release, while crude is at 133.8 million barrels, or 73 percent of the 183 million barrel release.
The United States is the biggest contributor, with crude release only, of 90.6 million barrels. Japan, South Korea, Germany, France, the UK, and Spain are also among the biggest contributors to the collective 183 million barrel release.
“Member countries began releasing emergency stocks in March, following the initial IEA decision. And based on the 1 April decision, they will be releasing volumes over the period through to October, according to the specific stockholding system and market needs in each country,” the IEA said on Friday.
By Julianne Geiger for Oilprice.com