Global oil demand in 2022 is expected to be 99.7 million barrels per day (mb/d), up by 2.1 mb/d from 2021, according to the International Energy Agency (IEA) latest report.
The IEA stated in its March monthly market report that this is due to rising commodity prices and international sanctions imposed on Russia, which are expected to significantly slow global economic growth.
“As a result, we have revised down our forecast for world oil demand by 1.3 mb/d for Quarter 2 (2Q22) to 4Q22, resulting in 950 thousand barrels per day (kb/d) which is a slower growth for 2022 on average,” it states.
According to the report, global refinery throughput estimates for 2022 have been revised down by 860 kb/d since last month’s Report, as a 1.1 mb/d reduction in Russian runs is not expected to be fully offset by increases elsewhere.
It said, “In 2022, refinery intake globally is projected to rise by 2.9 mb/d year-on-year to 80.8 mb/d. Despite a downgrade to demand, product markets remain tight with further stock draws expected throughout the year.”
In light of this, the IEA stated that Russia’s invasion of Ukraine has pushed energy security back to the top of political agendas, even as commodity prices reach new highs. While it is too early to predict how events will unfold, the crisis may cause long-term changes in energy markets.
“The implications of a potential loss of Russian oil exports to global markets cannot be understated. Russia is the world’s largest oil exporter, shipping 8 mb/d of crude and refined oil products to customers across the globe.
“Unprecedented sanctions imposed on Russia to date exclude energy trade for the most part, but major oil companies, trading houses, shipping firms and banks have backed away from doing business with the country,” it said.
For the time being, the IEA believes that a 3 mb/d cut in Russian oil supply could begin in April, but losses could increase if restrictions or public condemnation become more severe.
The prospect of large-scale disruptions in Russian oil production, according to the report, threatens to create a global oil supply shock.
It said, “We estimate that from April, 3 mb/d of Russian oil output could be shut in as sanctions take hold and buyers shun exports.
“Organization of the Petroleum Exporting Countries and its alliances (OPEC+) is, for now, sticking to its agreement to increase supply by modest monthly amounts.
“Only Saudi Arabia and the UAE hold substantial spare capacity that could immediately help to offset a Russian shortfall,” IEA explained.