IEA Cuts Oil Demand Forecast

The International Energy Agency (IEA) has said that global oil demand is expected to average 99.4 million barrels per day (bpd) this year, cutting its 2022 demand outlook by 260,000 bpd. This is the result of of the of severe lockdowns in China,  the world’s largest oil importer.

The "zero-COVID" policy in China has resulted in a strict lockdown of 26 million people in Shanghai. This has led to lower expectations of oil demand in the second quarter of 2022 and the full year as a whole, the IEA said in its monthly Oil Market Report for April.

In addition to this, OPEC has cut its oil demand growth estimate for 2022 by almost 500,000 bpd due to lower expected global economic growth resulting from COVID lockdowns in China and teh Ukraine war.

According to the IEA, lower demand expectations and steady output increases from OPEC+ members along with the US and other non OPEC+ countries, and massive stock releases from IEA member countries should prevent a sharp deficit from developing.

Global inventories continued to draw down in February, with OECD industry stocks falling by another 42.2 million barrels to 2.611 billion barrels in February, nearly double the seasonal trend. Hower, in March, preliminary data shows a build in OECD industry stocks of 8.8 million barrels per the IEA estimates. 

They also stated that “From May onwards, close to 3 mb/d of Russian production could be offline due to international sanctions and as the impact of a widening customer-driven embargo comes into full force,”  The agency noted that the massive release of stockpiles from the U.S. and IEA allies is a “welcome relief to an already tight oil market that’s facing heightened uncertainty amid the multitude of repercussions stemming from sanctions and embargoes targeted at Russia by the international community and consumer boycotts.”
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According to IEA’s estimates of OPEC+ supply, the alliance’s 19 members with quotas collectively increased oil production by just 40,000 bpd in March, compared to the 400,000 bpd planned increase.