Rarely has the outlook for oil markets been more uncertain, the IEA reported. A worsening macroeconomic outlook and fears of recession are weighing on market sentiment, while there are ongoing risks on the supply side. The IMF has cautioned that a recession next year cannot be ruled out, given the elevated risks. The World Bank now expects world GDP growth to ease to 2.9% in 2022 from 5.7% in 2021.
Higher prices and a deteriorating economic environment have started to take their toll on oil demand, but strong power generation use and a recovery in China are providing a partial offset. Global oil demand growth has been marginally reduced to 1.7 mb/d in 2022, reaching 99.2 mb/d. A further 2.1 mb/d gain is expected in 2023, led by a strong growth trajectory in non-OECD countries.
World oil supply jumped by 690 kb/d to 99.5 mb/d in June as resilient Russian production and higher output from the US and Canada more than offset steep maintenance-related losses from Kazakhstan. Production is expected to rise by 1.8 mb/d by end-year to reach 101.3 mb/d. Global oil supply is set to average 100.1 mb/d in 2022 before hitting an annual record of 101.1 mb/d in 2023.
Refinery throughputs rose by 500 kb/d in June, to 79.2 mb/d, 1.2 mb/d above a year ago. A number of outages and tight spare capacity outside of China meant that product supply failed to keep up with the seasonal increase in demand. Product cracks nevertheless fell from records highs observed in late May, but were on average substantially higher on a monthly basis.
Russian oil exports in June fell by 250 kb/d m-o-m to 7.4 mb/d, the lowest since August 2021. This time, the decline was led by crude oil, while product shipments were relatively stable at 2.4 mb/d. Meanwhile, export revenues increased by $700 million m-o-m on higher oil prices, to $20.4 billion, 40% above last year’s average.
Global observed oil inventories rose by a modest 5 mb in May as a sharp increase in non-OECD crude stocks was offset by lower OECD stocks and oil on the water. OECD industry stocks rose by 15.2 mb to 2 691 mb, still 301.3 mb below the 2017-2021 average, helped by the release of 32.1 mb of government stocks. Preliminary data for June show total OECD stocks built by 22 mb.
Benchmark crude oil futures plunged by more than $20/bbl in June as a worsening economic outlook fuelled a broad market sell-off. At the time of writing, Brent was below $100/bbl while WTI traded at around $96/bbl. Price premiums for physical barrels widened on rising seasonal demand for both crude and products while supply remains constrained.