According to the latest IEA Oil Market Report, soaring oil use for power generation and gas-to-oil switching are boosting demand.

In the report, the IEA has raised its estimates for 2022 global demand growth by 380 kb/d, to 2.1 mb/d. Gains mask relative weakness in other sectors, and a slowdown in growth from 5.1 mb/d at the start of the year to less than 100 kb/d by the fourth quarter of 2022. World oil demand is now forecast at 99.7 mb/d in 2022 and 101.8 mb/d in 2023.

World oil supply hit a post-pandemic high of 100.5 mb/d in July as maintenance wound down in the North Sea, Canada and Kazakhstan. OPEC+ ramped up total oil production by 530 kb/d in line with higher targets and non-OPEC+ rose by 870 kb/d. World oil supply is set to rise by a further 1 mb/d by year-end. The report revises up the forecast for Russian oil output but has lowered the outlook for North America.

Refinery throughputs rose by 1.1 mb/d in July and are set for a further 350 kb/d gain this month, reaching their highest level since January 2020. The increase was above refined product demand, driving cracks and refinery margins sharply below the all-time highs seen in June. Global refinery runs are now on track to rise by 2.6 mb/d in 2022 and 1.3 mb/d next year.

Russian oil exports fell by 115 kb/d in July to 7.4 mb/d, from about 8 mb/d at the start of the year. Crude and oil product flows to the US, UK, EU, Japan and Korea have slumped by nearly 2.2 mb/d since the outbreak of the war, two-thirds of which have been rerouted to other markets. Export revenues fell from $21 billion in June to $19 billion in July, due to reduced volumes and lower oil prices.

Global observed inventories fell by a marginal 5 mb in June, with a drawdown in both OECD and non-OECD stocks partially offset by an increase in oil on water. OECD total industry stocks increased by 6.2 mb, to 2 681 mb but remained 292.1 mb below the five-year average. Government stocks released to the market totalled 33.8 mb in June, the largest drawdown since March.

Benchmark crude oil futures have sunk by around $30/bbl since a June peak as worsening economic prospects and oil demand growth weighed on sentiment. At the time of writing, Brent traded at around $97/bbl and WTI $92/bbl. Steadier forward prices flattened backwardation across the futures curve and prompt physical premiums eased.