IEA trims global oil demand forecast on China weakness

The Worldwide Power Company has lowered its international oil demand forecast due to surging coronavirus instances in China and weaker than anticipated demand within the US and different developed international locations.

The power watchdog now expects demand to common 99.4mn barrels a day this yr, down from its earlier estimate of 99.7mn b/d in March.

“The stringent lockdowns in China have led us to additional revise down our estimate for oil demand within the second quarter and for the yr as an entire,” the Paris-based group stated in its month-to-month oil market report on Wednesday.

“As well as, extra full demand information for the primary quarter of 2022, particularly within the US, was sharply decrease than preliminary estimates.”

The oil market has been extraordinarily risky since Russia’s invasion of Ukraine on February 24. Costs whipsawed on considerations over falling Russian provides and big inventory releases by massive energy-consuming nations, together with the US.

Brent crude, the worldwide benchmark, final month hit nearly $140 a barrel in frenzied buying and selling because the market tried to evaluate the impression of the warfare on Russia’s huge oil business. It then pulled again because the US and different IEA member international locations introduced plans to launch 240mn barrels from their strategic reserves over the subsequent six months.

Brent fell under $100 a barrel on Monday however then rebounded and was buying and selling at $105 on Wednesday.

The IEA expects Russian oil provide to fall by 1.5mn b/d in April and forecasts as much as 3mn b/d may very well be offline from Could as a consequence of “worldwide sanctions and because the impression of a widening customer-driven embargo comes into full drive”.

The IEA says weaker demand, the huge inventory launch introduced by its members and regular output from Opec and its allies ought to stop a “sharp deficit” from creating within the oil market regardless of the discount in Russian provide. Nevertheless, it warned that the outlook was “mired in uncertainty”.

“The IEA’s newest inventory launch thus supplies a vital buffer to grease markets and far wanted aid to consuming international locations,” it stated.