A rebound in global oil demand is underway, with the International Energy Agency (IEA) anticipating an increase of over 8 million barrels per day by October from the low point in May. This surge is fueled by heightened fuel consumption during the peak summer travel season and the release of pent-up demand. Despite this, global oil demand is projected to decrease by 1 million barrels per day this year before rebounding by 2 million barrels per day in 2027, according to the IEA’s latest ‘Oil Market Report.’
The IEA warns that while the global oil market balance is expected to shift back to surplus later this year, this forecast relies on the gradual recovery of tanker flows through the Strait. This recovery would enable producers to restart fields and refiners in the Middle East and other regions to resume product shipments. The agency emphasizes the importance of reaching a lasting peace agreement to normalize oil markets, especially in light of recent conflicts in the Gulf region.
In June, global observed oil inventories increased for the first time in four months, rising by 21 million barrels due to higher oil on water volumes offsetting continued draws in onshore tanks. OECD stocks fell by 62 million barrels in June, with government stock releases contributing to this decline. Non-OECD crude stocks decreased by 37 million barrels, primarily driven by a 41 million barrel draw in China, as per the report.
Benchmark crude oil prices experienced a significant decline in June, erasing previous gains and shifting market focus to oversupply concerns. North Sea Dated crude prices dropped by $22 per barrel to around $68 per barrel, with prompt time spreads returning to contango. Following breaches in the ceasefire agreement, prices rose to approximately $77 per barrel. Refinery activity and product supplies have been slow to respond to the influx of crude oil into the market, with Gulf exports of refined products and LPG remaining below pre-war levels.
