Benchmark crude oil prices traded in a narrow range in June as persistent economic woes overshadowed deepening supply cuts from some OPEC+ countries. Amid an overall slackening in oil demand growth, China’s widely anticipated reopening has so far failed to extend beyond travel and services, with its economic recovery losing steam after the bounce earlier in the year. North Sea Dated hovered around $75/bbl for the month, marginally below May levels and a staggering $49/bbl less than a year ago. At the time of writing, the North Sea benchmark had inched up to $80/bbl.
Lower production from Saudi Arabia and core OPEC+ members since production cuts were first implemented last November has so far been offset by higher output from other producers. In June, global oil supply was a mere 70 kb/d below October levels just before the first round of OPEC+ cuts kicked in. Iran, exempt from cuts due to sanctions, ramped up production by 530 kb/d over the same period, reaching a five-year high. At the same time, output recovered in Kazakhstan and Nigeria. Outside of the alliance, supply from the United States rose by 610 kb/d as natural gas liquids output surged to all-time highs while biofuels increased seasonally. But global supply could tumble by more than 1 mb/d this month as Riyadh implements steeper cuts. The Kingdom’s crude output is set to plunge to a two-year low of around 9 mb/d in July and August, leaving it trailing behind Russia as the bloc’s top crude producer.
World oil demand is coming under pressure from the challenging economic environment, not least because of the dramatic tightening of monetary policy in many advanced and developing countries over the past twelve months. Growth in 2023 has been revised down for the first time this year, to 2.2 mb/d from 2.4 mb/d expected previously, with China poised to account for 70% of the total. While Chinese demand growth continues to surprise to the upside, a surge in domestic petrochemical activity has undermined steam cracker margins and activity elsewhere. Demand in the OECD, and Europe in particular, is languishing amid a grinding slowdown in industrial activity. African countries have seen imports and demand decline by higher retail fuel prices after subsidies were dismantled. Even so, global oil demand is set to rise seasonally by 1.6 mb/d from 2Q23 to 3Q23, and to average 102.1 mb/d for the year as whole. Growth will slow to 1.1 mb/d in 2024, as the recovery loses momentum and as ever-greater vehicle fleet electrification and efficiency measures take hold.
Global observed oil inventories look relatively comfortable, having recovered to their highest level since September 2021. OECD industry stocks rose by 170 kb/d in May. At the same time, China posted its largest monthly increase in crude stocks in a year, at a steep 1.1 mb/d, fuelled by a sharp rise in crude oil imports and despite near-record refinery throughput rates. China’s recent buying spree included heavily discounted Russian and Iranian barrels. Global oil balances imply a marginal stock build in 2Q23. But with the surplus mostly in Chinese crude and US LPG tanks, ongoing draws in oil on water and deeper supply cuts starting this month suggest the oil market may soon see renewed volatility.
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July 07, 2023 at 02:00PM
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Oil Market Report - July 2023 – Analysis - IEA
"oil" - Google News
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