The International Energy Agency (IEA) on Wednesday revised down its global oil demand estimates for 2022 by around 260,000 barrels per day (bpd) compared to last month's assessment.
Global oil demand is now estimated to reach 99.4 million bpd in 2022, although the forecast still marks a year-over-year rise of 1.9 million bpd, according to the IEA's latest oil market report.
The agency said a surge in COVID-19 cases and severe new lockdowns in China have led to a downward revision to global demand in the second quarter of 2022 and for the year as a whole.
According to the IEA, weaker-than-expected demand in Organisation for Economic Co-operation and Development (OECD) countries at the start of the year also added to the decline.
"More complete data for the first quarter of 2022, especially in the U.S., were weaker than preliminary estimates, adding to the downgrade," the IEA explained.
Global supply rises
Global oil supply increased by 450,000 bpd in March to 99.14 million bpd, led by non-OPEC+ producers who more than offset small decreases from OPEC+ members Russia, Kazakhstan and Libya, the IEA said.
Daily crude oil production of the Organization of Petroleum Exporting Countries (OPEC) rose to 28.54 million bpd in March, with an increase of 60,000 bpd compared to the previous month.
During this period, OPEC natural gas liquids were recorded as 5.35 million bpd, increasing OPEC's total oil production to 33.89 million bpd last month.
Non-OPEC production also saw an increase of 310,000 bpd to 65.25 million bpd in March.
According to the agency, the OPEC+ group's long-running struggle with capacity constraints and technical issues pushed the supply gap compared to official output targets during March to 1.5 million bpd.
The IEA said the supply gap is "the widest since record cuts of nearly 10 million bpd were enforced in May 2020 to counter COVID-induced demand destruction."
According to the agency's projections, Russia's oil supply will fall by 1.5 million bpd in April, with shut-ins projected to accelerate to around 3 million bpd from May.
The IEA noted that despite the magnitude of the Russian oil supply disruption, weaker demand growth and steady output increases from Middle East OPEC+ members along with the U.S. and other countries outside the OPEC+ alliance (non-OPEC+) should prevent a severe deficit from developing.
The IEA estimated that excluding Russia, output from the rest of the world is set to rise by 3.9 million bpd from March through December.
"OPEC+ is expected gradually to increase output by 1.9 million bpd, assuming it fully unwinds OPEC+ cuts in line with existing policy. Middle East members of the group account for most of the increase. Saudi Arabia is projected to add 780,000 bpd while Iraq, Kuwait and the UAE between them could add a similar amount," the agency explained.
According to the IEA, non-OPEC+ producers are expected to pump 2 million bpd more and the U.S. is set to lead the gains, rising by 1.27 million bpd, while Canada, Brazil and Guyana will also post substantial increases.
"For the year as a whole, production is forecast to rise 5.5 million bpd (excluding Russia) – with OPEC+ accounting for 3.5 million bpd and non-OPEC+ 2 million bpd. The U.S. accounts for 62% of the non-OPEC+ expansion," the agency added.