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IEA: Lower crude demand, rising output to fend off acute supply deficit

Amid the widening supply and demand uncertainties, oil market volatility remains rife, but prices are trading in a lower and narrower $10/bbl range above $100/bbl

IEA: Lower crude demand, rising output to fend off acute supply deficit

Paris, May 13 - Neftegaz.RU. Despite lower output from Russia in April, the world’s crude oil supply is meeting demand as China’s economy slows down, the International Energy Agency (IEA) said.

Russia shut in nearly 1m bbl/day in April, driving down the world’s supply by 710,000 bbl/day to 98.1m bbl/day, said the IEA.
It added:
  • Over time, steadily rising volumes from Middle East OPEC+and the US, along with a slowdown in demand growth [due to China lockdowns slowing its economy], is expected to fend off an acute supply deficit amid a worsening Russian supply disruption
The IEA expects Russian supply to worsen as the country’s isolation «deepens» as the EU and the G7 group of richest nations contemplate tougher sanctions for its invasion of Ukraine in February.
These sanctions could include a full phase-out of oil imports from Russia.
The IEA noted:
  • If agreed, the new embargoes would accelerate the reorientation of trade flows that is already underway and will force Russian oil companies to shut in more wells …
But the «rapid early-May advances» on the 6th round of EU sanctions for Russia drove renewed price tensions, said the IEA, with high crude prices and «exceptional product cracks» fuelling inflation.

Despite mounting international pressure and falling oil production, Russian exports have so far held up by and large, according to IEA figures, but the situation could quickly change from now.
The IEA said:
  • Major trading houses are winding down deals ahead of a 15 May deadline [emanating from the sanctions imposed on Russia] to halt all transactions with state-controlled Rosneft, Gazprom Neft and Transneft
  • Following a supply decline of nearly 1m bbl/day in April, losses could expand to around 3m bbl/day during the 2nd half of the year

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