Since its peak in June, the price of a barrel of crude oil has lost about 30 dollars, says the International Energy Agency (IEA) in its monthly report published this Thursday. The main reason for this is an increase in supply. In the month of July alone, it increased by 1.4 million barrels per day (mb/d), to average 100.5 mb/d, its highest level since January 2020, before the start of the pandemic.
However, demand remains strong. The agency revised its estimate for 2022 upward by 380,000 barrels per day to 99.7 mb/d. It benefits from the new needs created in particular by the use of oil instead of natural gas, which is still reaching record levels, as a fuel in industry or to produce electricity. ” With several regions experiencing scorching heat waves, the latest data confirms an increase in the use of oil to generate electricity, particularly in Europe and the Middle East, but also throughout Asia. »says the IEA. This fuel switch ” also takes place in European industry, including refineries »the authors of the report point out.
However, this average demand masks ” relative weaknesses in other sectors » and a slowdown in its growth, which will go from 5.1 mb/d at the beginning of the year to less than 100,000 barrels per day in the last quarter of 2022, the agency points out.
End of maintenance operations
For its part, global supply benefited from the completion of certain maintenance operations in the North Sea, Canada and Kazakhstan. The Organization of the Petroleum Exporting Countries (OPEC) and its allies (OPEC+) only marginally increased their production. As for Russia, one of the main OPEC countries, it did not see its exports collapse after the invasion of Ukraine. In its previous report, the IEA anticipated, in fact, a drop of 2 mbd. Today, she finds that” due to limited impact to date of US and EU sanctions », Russian exports fell to just 7.4 mb/d in July, down from 8 mb/d at the beginning of the year.
In reality, the Russian oil supply has only changed its fate. In June, says the IEA, ” Crude oil exports to China, which amounted to 2.1 mb/d, exceeded for the first time the volumes sent to EU countries, with 1.8 mb/d ». The movement should intensify in the coming months, as the European embargo on Russian crude is strictly enforced.
As a result, Russia has become ” China’s main source of crude oil in May and June »says the agency. Thus, the People’s Republic accounted for 35% of Russia’s crude oil exports, while Russia accounted for around 20% of China’s crude oil imports. Meanwhile, Russian exports to India hit a new record high of 975,000 bpd in July, according to IEA data.
Rise in OECD trade shares
At this stage, the IEA even anticipates that ” global oil supply is due to increase by another 1 mb/d by the end of the year ». A phenomenon that manifests itself in the form of an increase in the commercial actions of companies in the OECD countries. In addition, the agency shows in its report a close correlation between the level of these commercial actions and the price of Brent: when the actions go up, the price of Brent goes down. (see chart).
The IEA thus validates the validity of the decision of the United States and all the OECD countries to resort to their strategic stocks (240 million barrels, of which 180 million for the United States alone) to regularly supply the market in recent months. It contributed to lower prices that in March had approached 130 dollars a barrel, after the Russian invasion of Ukraine. This Thursday, the price of a barrel of Brent fluctuated around 98 dollars while that of WTI fluctuated around 92.5 dollars.
But this fall in prices and this increase in commercial inventories anticipate the risk of a recession, especially in Europe. In its latest report on the outlook for the world economy, the International Monetary Fund (IMF) had revised its growth forecasts down to 3.2% (-0.4 points) in 2022 and to 2.9% (-0.7 points) in 2023. A recession that is especially likely to affect Europe, which is facing an energy crisis that is weighing on the European economy. In its report, the IEA also recalls that the consumer confidence index in the euro zone reached a record low in July.
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