A recovery in world oil demand is under way, with consumption set to rise from its May nadir on seasonal trends and as pent-up demand is released in line with a rebound in product supplies, an IEA report said.
Global observed oil inventories rose for the first time in four months in June.
IEA revised its outlook for global oil demand for 2026, projecting an annual rise that is 1 mb/d lower than last year.
Global observed oil inventories rose for the first time in four months in June, by 21 mb, as sharply higher oil on water volumes more than offset continued draws in onshore tanks.
IEA revised its outlook for global oil demand for 2026, projecting an annual increase that is 1 mb/d lower than last year—a slight improvement from its previous projection of a 1.1 mn/d decline, reflecting signs of stabilisation in energy markets despite ongoing geopolitical tensions.
Following a decline of 73 mb in May, total stocks of the Organisation for Economic Cooperation and Development (OECD) fell by a further 62 mb in June, of which an estimated 44 mb came from government stock releases. Non-OECD crude stocks eased by 37 mb in June, led by a 41 mb draw in China, an IEA release said citing the report..
Benchmark crude oil prices continued to spiral lower in June, erasing all of their wartime gains, as tanker traffic out of the Gulf picked up and market focus shifted to the prospect of oversupply.
With the United States temporarily lifting restrictions on Iranian exports and providing security support for non-Iranian shipments, tankers stuck in the Strait rushed to exit.
But while a wave of crude oil hit the market, refinery activity and product supplies have been much slower to respond. Gulf exports of refined products and LPG in June remained less than half their pre-war levels, compared with crude flows that reached nearly three-quarters of their February rates.
Loadings from key export refineries in the Gulf have yet to resume, suggesting operations remain constrained, according to the IEA report.
Against this backdrop, intensifying Ukrainian attacks on Russian refineries and export infrastructure have further tightened product markets in Russia and beyond, with exports and domestic fuel deliveries both significantly affected, it noted.
The disconnect between apparently well-supplied crude oil markets and tight product markets underpinned a rally in cracks and refinery margins to four-year highs by early July.
While concerns over jet fuel shortages have eased in recent weeks after refiners pushed output to new highs, diesel and gasoline markets have tightened, with gasoline cracks moving sharply higher.
While the global oil market balance looks set to swing back to surplus towards the end of the year, the IEA forecast hinges on the assumption that tanker flows through the Strait of Hormuz will gradually recover, allowing producers to restart fields and refiners in the Middle East and elsewhere to resume product shipments.
Renewed exchanges of fire in the Gulf recently highlight the risks of not reaching a lasting peace agreement, which is a must for the normalisation in oil markets, the report added.
Fibre2Fashion News Desk (DS)
