The IEA Oil Market Report (OMR) is one of the world’s most authoritative and timely sources of data, forecasts and analysis on the global oil market – including detailed statistics and commentary on oil supply, demand, inventories, prices and refining activity, as well as oil trade for IEA and selected non-IEA countries.
he market is caught in the cross-currents of supply outstripping still-lacklustre demand, with stocks building to levels not seen in 18 months. Much of the supply overhang reflects ample Russian barrels racing to re-route to new destinations under the full force of EU embargoes. Despite the increasing dislocation in global trade, the rising stock cover has held the Brent crude oil futures in a relatively narrow $80-85/bbl range since the start of the year.
A 52.9 mb January surge in global inventories lifted known stocks to nearly 7.8 billion barrels, their highest level since September 2021 and preliminary indicators for February suggest further builds. Despite solid Asian demand growth, the market has been in surplus for three straight quarters.
While Russian oil production remained near pre-war levels in February, Russia’s exports to world markets fell by more than 500 kb/d to 7.5 mb/d. Shipments to the EU plunged by 760 kb/d to just 580 kb/d. Over the past year, 4.5 mb/d of Russian oil previously going to the EU, North America and OECD Asia Oceania has had to find alternative outlets. Willing buyers in Asia, namely India and, to a lesser extent, China, have snapped up discounted crude oil cargoes, but increasing volumes on the water suggest the share of Russian oil in their import mix may be getting too big for comfort. Russia accounted for around 40% and 20% of Indian and Chinese crude imports, respectively, in February. The two countries took in more than 70% of Russia’s crude exports last month.
At least for this month, Moscow has signalled it will cut output by 500 kb/d. Even so, world oil supply should comfortably exceed demand in the first half of the year. Building stocks today will ease tensions as the market swings into deficit during the second half of the year when China is expected to drive world oil demand to record levels. Global demand is set to surge by 3.2 mb/d from 1Q23 to 4Q23, taking average growth for the year to 2 mb/d. Matching that increase would be a challenge even if Russia were able to maintain production at pre-war levels.