Physical crude oil markets have weakened as demand is underperforming expectations amid sufficient supply, analysts and traders have told Reuters.
Demand appears to be especially underwhelming in Europe, where the key crude grades that underpin the Brent Crude benchmark have weakened in recent weeks, to the widest discounts to Dated Brent for a year.
Demand in the U.S. also looks weaker for the coming start of summer travel. Refinery utilization rates haven’t rebounded despite the end of planned maintenance season.
So far this year, demand in many markets appears softer than expected, which has weighed on physical crude prices. This, in turn, could pressure the paper market with a potential further slide in oil futures prices if demand doesn’t rebound soon, according to analysts who spoke to Reuters.
Weaker physical demand and oil prices could give the OPEC+ group enough reason to continue its current production cuts into the second half of the year. The alliance is meeting on June 1 to decide whether to roll over or start unwinding the cuts of about 2.2 million barrels per day (bpd).
Last week, the International Energy Agency (IEA) said that global oil demand growth is expected at just 1.1 million bpd this year, due to weak first-quarter consumption in developed economies. The agency cut its growth forecast by 140,000 bpd from its assessment last month.
Weak deliveries of middle distillates in Europe and the United States were “enough to tip OECD oil demand in the first quarter back into contraction,” said the agency, whose demand growth projection is now less than half of the growth OPEC expects this year.
OPEC, however, kept its 2024 and 2025 outlook of robust oil demand unchanged from last month, due to a resilient global economy early this year with additional upside potential with the possible easing of monetary policies.
Take the Survey at https://survey.energynewsbeat.com/
ENB Top News ENBEnergy DashboardENB PodcastENB Substack
Energy News Beat