Oil Market Snapshot – June 2022

  • The EU has agreed direct and secondary sanctions on Russian oil, pushing prices toward $120/bbl
  • We forecast global demand growth of 2.38 million b/d for 2022 (-260,000 b/d on previous), which would keep demand below 2019 levels for another year
  • China's lockdowns have hurt demand there, but pent-up demand may now add to a tight market in the high demand summer season
  • We forecast global supply growth of 3 million b/d in 2022 (-970,000 b/d on previous), with non-US non-OPEC production declining due to lost Russian production
  • We see Russia losing 2.8 million b/d by YE22, when the sanctions are fully in place, and few alternative sources of supply
  • OPEC+ has signalled continuing with the existing agreement, but there are rumours the group is considering an exemption for Russia
  • We consider this difficult to achieve by the meeting on 2nd June, but more plausible for later meetings
  • We see a deficit of 1.83 million b/d in 2022 (650,000 b/d larger than previous) leaving the market very tight and consumer countries hoping for the Iran deal to be resolved soon
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Oil Market Snapshot – April 2022

  • Brent ends April trading at c. $109/bbl after another turbulent month
  • We forecast global demand growth of 2.64 million b/d for 2022 (-300,000 b/d on previous)
  • This follows a major downgrade to global economic growth from the IMF, on the basis of Russia's invasion of Ukraine and persistent lockdowns in China
  • Ongoing inflation and supply chain issues combine with the direct effect of the war on the economies of Russia, Ukraine, and Europe more widely
  • We forecast global supply growth of 3.97 million b/d in 2022 (-71,000 b/d on previous), as Russia's production losses become more concrete
  • With the OPEC+ deal ending in September, the group will maintain its schedule until then barring a desperate market shortage
  • A coordinated stock release between the US and other IEA members should add 1.3 million b/d over six months, but Russian losses may reach as high as 3 million b/d month to month
  • Averaged over the whole year, the country will lose at least 1 million b/d of crude, and likely more
  • We see a deficit of 860,000 b/d in 2022 (410,000 b/d larger than previous) as Russia's productio...

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Oil Market Snapshot – March 2022

  • Brent is trading around $114/bbl at the end of the most volatile month in the contract's history. The last thirty days have seen prices as high as $139/bbl and below $100/bbl
  • The extreme volatility sees us suspend our price forecast. The EIA forecasts an average price of $105.05/bbl for 2022 (+$22.09/bbl on previous)
  • We forecast global demand growth of 2.94 million b/d for 2022 (-610,000 b/d on previous), lowered as a result of lockdowns in China and the prospect economic turmoil from the war
  • This leaves global annual average demand below 2019's level for a third year, with inflation still a downside risk as OECD nations indiscriminately cut fuel taxes, supporting demand
  • We forecast global supply growth of 4.68 million b/d in 2022 (-1.13 million b/d on previous), with around half the change due to lost Russian production
  • Though sanctions will not end if the war does, self-sanctioning may be reduced from its current levels
  • The meeting of March 31st is again likely to see no change to the OPEC+ schedule, with the key Gulf members stating their support for keeping Russia in the group
  • So far...

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Oil Market Snapshot – February 2022

  • Russia's invasion of Ukraine sent Brent to $105/bbl. It trades now at c. $103/bbl after the imposition of sanctions, with the prospect of high prices for the foreseeable future
  • We forecast global demand growth of 3.55 million b/d for 2022 (-150,000 b/d on previous), with demand finally exceeding 2019's level
  • Inflation remains a downside risk, running above 7% in the US currently, while China's zero tolerance policy on COVID has also impacted its growth
  • We forecast global supply growth of 5.81 million b/d in 2022(-40,000 b/d on previous), based on OPEC+ sticking to its scheduled unwind of its cuts deal
  • The meeting of March 2nd is likely to see the group maintain its schedule, with the Ukraine situation only potentially impacting policy if Russian production is materially affected
  • In such a case, Saudi Arabia's instinct to stabilise the market by covering lost production would have to be tempered by avoiding being seen to take Russia's market share
  • Major oil companies have booked high free cash flow, with capex remaining low and prices high. But much of the windfall is being returned to shareholders

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