Russia is the main joker in the global oil scenario
Averaged forecast of the IEA, the US Department of Energy and OPEC on the dynamics of consumption in Europe oil in 2022 (in million b/d): 1 sq. – yellow, 2 sq. – white, 3 sq. – Blue, 4 sq. – orange. Source: Bloomberg
Growth in oil consumption is declining in the coming months, but consumption can likely endure high prices until consumption recovers with a supply that is still struggling to meet the world’s fuel demand.
The International Energy Agency, the US Department of Energy and the Organization of the Petroleum Exporting Countries note that the growth in oil consumption is slowing down from the high rates of the first quarter of next year. But the Paris-based IEA is the only one of the three organizations that predicts that growth will turn into a recession, although this is only in the last quarter of the year. That said, even then, the drop will be very modest, amounting to only 390,000 barrels per day compared to the same period in 2021.
The US Department of Energy expects a slowdown in the growth rate of oil consumption in several quarters in a row, but predicts that by the end of the year the dynamics of this use will be quite significant. OPEC, on the other hand, takes a much more optimistic orientation. Although the growth rate of increased food consumption doubled between the first and subsequent quarters, there was a growth cartel that would increase by 2 million barrels during the remainder of 2022. And this despite the very high prices.
Of the three organizations, OPEC is the only one predicting that global oil demand is expected to be at pre-pandemic levels as early as 2022. According to the forecasts of the IEA and the US Department of Energy, global consumption of black gold this year will lag behind 2019 by about 1 million barrels per day.
There is another important value in expectations. While demand in OPEC forecasts China to grow by 2% this year, the IEA believes it will be the other way around and will decline by 1% due to lockdowns that are a consequence of the zero tolerance policy for Covid-19. Other projections show much closer unity, with both the IEA and OPEC expecting demand in India to increase by 6% to 7%, while demand in the Russian-dominated former Soviet Union will decline by about 4%.
Supply is struggling to keep up with demand. The IEA predicts that total non-OPEC production will decline sharply in the second quarter compared to the first, with growth in US production more than offset by declines in Russia and other non-OPEC countries. Basically it will be a stop for the export terminal of the Caspian Pipeline Consortium (CPC) spread by Kazakhstan.
Earnings dynamics (in million b/d) in the US (orange), Russia (white) and other non-OPEC countries (blue). Data: IEA, source: Bloomberg
Production growth should recover in the quarter, with growth expected in Kazakhstan, continued growth in the US and a slight drop in production in Russia. The EU regarding its offshore oil exports is due to enter into force in December. Falling income in Russia is forecast to outweigh slowing but still positive income growth in the rest of the world outside of OPEC.
By this time, the OPEC+ deal, which is expected to slowly return to the market more than 10 million barrels per day of oil seized at the height of the pandemic in early 2020, may be at an end. producers have not yet decided what they will do after August, when production quotas reach natural levels. Most members of the alliance have either already brought oil production to the maximum level available to them or are approaching its unacceptable groups as a whole for each month more and more of the total target production volume. According to the group’s data, 10 OPEC countries stake in the deal, May’s production of nearly 1.1 million barrels, is 25.589 billion barrels per day.
Analysts from these agencies also regulate the amount of oil in Russia. OPEC has raised its forecast and now it is expected that the country’s average production in 2022 will be reduced by 250,000 barrels per day compared to the significant forecast, and the total decline will be 200,000 barrels per day compared to 2021. These are modest figures compared to the IEA’s forecast, but OPEC warns that its estimates are “subject to high uncertainty.”
Initially (in March), the IEA expected revenue in Russia to increase by about 3 million barrels per day in 2022, but this figure is now projected to be issued to 9.38 million barrels per day by the fourth quarter and will decrease further in early 2023. of the year.
OPEC estimates that Russian oil production stood at 964,000 barrels a day between March and April before rising by 152,000 barrels a day in May. The IEA presents a similar picture.
Evolution of IEA forecasts for the dynamics of oil production in Russia (in million b/d). Source: Bloomberg
Prepared by ProFinance.ru by materials Bloomberg agency
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