China’s blockade will help reduce global oil demand, the IEA predicts butter

The draconian blockade measures introduced in China to combat Covid-19 outbreaks mean global demand for oil will not be as high as expected, the International Energy Agency said, helping to mitigate the impact of declining supplies from Russia.

In its monthly report on global oil markets, the IEA said it expects Russia’s production to fall by 1.5 million barrels per day (bpd) in April, with the decline accelerating to 3 million barrels per day since May as buyers either voluntarily boycott Kremlin-controlled supplies or abstain due to uncertainty about sanctions.

The forecast shows that as a result, up to 3% of global supply could be lost by mid-spring, given Russia’s position as the world’s second-largest oil producer. But there are unlikely to be “sharp deficits” in global oil markets, the IEA said, thanks to a number of factors mitigating the impact of lost Russian flows.

The latest is the imposition of what he called “strict” anti-Kovid restrictions in China, where the one-party state has blocked all 26 million people in Shanghai. Weaker-than-expected demand in OECD countries – a group of predominantly developed nations – added to the decline, the Paris-based agency said.

As a result, the organization lowered its forecast for global oil demand by 260,000 barrels per day compared to last month’s forecast and now expects the world to need an average of 99.4 million barrels per day in 2022.

The figure is still rising by 1.9 million barrels per day in 2021 due to this year’s global economic recovery, which has been hit harder by Covid’s restrictions around the world.

This recovery, combined with market shocks caused by the Russian invasion of Ukraine, has led to rising oil prices to almost record highs.

As a result, the rise in fuel prices is being felt by motorists in countries including the United States and the United Kingdom, where petrol and diesel have reached a series of all-time highs, contributing to a growing cost-of-living crisis.

The IEA’s new lower forecast should now allay concerns about oil prices, especially given the improved picture of oil production.

Global supply increased by 450,000 barrels per day to 99.1 million barrels per day in March, supported in particular by increased production from non-OPEC cartel countries.

OPEC countries, such as Saudi Arabia and Iran, have agreed to an increase of 400,000 barrels a day, but have not gone as far as large oil consumers like the United States and India had hoped.

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IAEA member states have also agreed to a coordinated release of 120 million barrels of emergency reserves to help lower the price of oil, a move that the organization said has brought Brent oil prices down by $ 10 to $ 104.

The price reached $ 114 in the first days of the Russian invasion of Ukraine, and analysts predicted it could surpass the record high of $ 147.50 reached in 2008.

However, IAEA publications have contributed to a long-term trend of declining reserves, with inventories declining for 14 consecutive months.

Stocks in February were 740 million barrels below the levels at the end of 2020, with OECD countries accounting for 70% of the decline.

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