The relentless deterioration of the economy and rising prices prompted by an OPEC+ plan to cut supply are slowing global oil demand, the International Energy Agency (IEA) said in its report on October oil market. The IEA now expects global oil demand to contract by 340,000 bpd year-on-year in the fourth quarter of 2022.
Meanwhile, the IEA has cut its oil demand growth forecast to 1.9m b/d in 2022 and 1.7m b/d next year, down 60,000 bpd. /d and 470,000 bpd, respectively, compared to last month’s report. Global oil demand is now expected to average 101.3 million b/d in 2023.
Global oil supply rose by 300,000 bpd in September to 101.2m bpd, with OPEC+ providing more than 85% of the gains. After a massive increase of 2.1 million bpd from the second quarter of 2022 to the third quarter of 2022, growth is expected to slow markedly, to 170,000 bpd from the third quarter of 2022 to the fourth quarter of 2022, following the decision of the OPEC+ to cut production targets by 2m b/d from November – a 1m b/d cut in actual output given the bloc’s underperformance against quotas.
Global refining activity is also reacting to slowing demand and lower refining margins, with cycles in the third quarter of 2022 coming in lower than expected. IEA forecasts for the fourth quarters of 2022 and 2023 have been revised down by 340,000 bpd and 720,000 bpd, respectively, following downward revisions to demand and production cuts of OPEC+. Trips are now expected to increase by 2.2 million bpd in 2022 and 1.2 million bpd next year.
According to IEA data, Russian oil exports fell 230,000 b/d to 7.5 million b/d in September, down 560,000 b/d from pre-war levels . Shipments to the EU fell by 390,000 bpd mum. Less than 2 months from the entry into force of a ban on imports of Russian crude oil, EU countries have yet to diversify more than half of their pre-war import levels away from the Russia.
Observed global inventories rebounded by 36.5 million barrels in August, as lower onshore inventories (-27.8 million barrels) were offset by an increase in oil on water (+64.3 million barrels). barrels). OECD commercial oil inventories rose for a second consecutive month, by 15 million barrels in August, but remained 243 million barrels below the 5-year average despite the release of 32.8 million barrels of public stocks.
Brent futures fell 7% month-on-month in September and hit their lowest level since the start of the year at $84/bbl on September 26. OPEC+’s decision in early October to cut supply pushed Brent up around $14/bbl, to $97.92/bbl, before easing somewhat. Brent backwardation increased for the first time in 4 months in September, while open interest fell to its lowest level in 7 years.