The country has managed to reroute shipments of crude to Asia and the G7 price cap on crude appears to be helping to keep the barrels flowing. Russian oil production and exports have held up relatively well despite sanctions. World oil supply looks set to exceed demand through the first half of 2023, but the balance could quickly shift to deficit as demand recovers and some Russian output is shut in. Oil prices are back to pre-war levels with the exception of diesel, though even these have drifted much lower from last summer’s historical highs. Nearly a year on from Russia’s invasion of Ukraine, global oil markets are trading in relative calm. Forward curves and physical differentials were largely stable, except for in the US where refinery outages propelled gasoline margins higher, while at the same time weighing on WTI prices. North Sea Dated rose by $2.50/bbl m-o-m to $82.86/bbl in January, its first monthly increase since October, as economic sentiment marginally improved following China’s reopening.
Preliminary data for the US, Europe and Japan show a build of 28 mb in January, led by US crude and gasoline stocks. OECD industry stocks fell by 18.1 mb in December to 2 767 mb, 95.7 mb below the five-year average. Global observed oil inventories tumbled by 69.8 mb m-o-m in December, but were 40.5 mb higher than a year ago and 126 mb above the low reached in March 2022.Export revenues are estimated at $13 bn, marginally higher than in December but down 36% on a year ago. Product loadings held steady at around 3.1 mb/d. Crude oil exports increased by nearly 300 kb/d m-o-m, despite a further 450 kb/d decline in shipments to the EU. Russian oil exports rose to 8.2 mb/d in January ahead of the EU embargo and G7 price cap on refined products taking effect.Despite mild weather in Europe and a seasonal slowdown in road demand, product cracks rallied on supply concerns in the US and ahead of the EU embargo on Russian products coming into force. A further decline is expected in February on scheduled maintenance. Global refinery throughputs fell 730 kb/d in January, with US activity still recovering from the outages during the Arctic freeze.Supply from OPEC+ is projected to contract with Russia pressured by sanctions. We expect global output to grow 1.2 mb/d in 2023, driven by non-OPEC+. The pause comes after a sharp 1.2 mb/d decline at the end of 2022 led by the US and Saudi Arabia. World oil supply held largely steady in January, at around 100.8 mb/d.Jet/kerosene demand is expected to increase by 1.1 mb/d to 7.2 mb/d, 90% of 2019 levels. The reopening of borders will boost air traffic. The Asia-Pacific region (+1.6 mb/d), fuelled by a resurgent China (+900 kb/d), dominates the growth outlook. Following a modest year-on-year contraction in 4Q22, global oil demand is set to rise by 2 mb/d in 2023 to 101.9 mb/d.
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