The impact of sanctions and buyer aversion on Russian oil will take full effect from May onwards, the International Energy Agency said on Wednesday.
Countering that, expected lower demand in China, output increases from OPEC+ producers and beyond plus a record draw on emergency oil storage by the United States and its IEA member allies ought to prevent any sharp deficit, the agency said.
Global demand is now expected to be balanced with supply in the second quarter at 98.3 million barrels per day (bpd), the agency added, with the potential to calm soaring energy price inflation. It had previously expected market balance to be next achieved in the fourth quarter.
“For now, we assume (April) losses will grow to an average 1.5 million bpd for the month as Russian refiners throttle back further and buyers shy away,” the Paris-based body said.
“From May onwards, close to 3 million bpd could be offline as the full impact of a widening customer-driven voluntary embargo on Moscow comes into effect.”
The Russian shut-in is proceeding more slowly than the IEA predicted last month, when it forecast that the 3 million bpd loss would take effect from April.
Some buyers, especially in Asia, have increased purchases of Russian oil, but there is no sign yet of increased buying from China, the IEA added.
Chinese coronavirus lockdowns and lower than expected first-quarter demand, especially from the United States, prompted the IEA to lower its global oil demand forecast for the year by 260,000 bpd.
“Lower demand expectations and steady output increases from Middle East OPEC+ members along with the U.S. and other countries outside the OPEC+ alliance should bring the market back to balance,” the IEA said.
Combined production from OPEC+ countries was 1.5 million bpd below target in March in the widest undershot since the producer group introduced cuts in May 2020, the agency said, adding that it expects the shortfalls to increase.
The United States and other members of the 31-member IEA committed in recent weeks to a combined release of 240 million barrels of oil from emergency storage. Since the announcement, crude prices have fallen by nearly $9 to about $105 a barrel.