Here are some highlights from the IEA’s Monthly Oil Report for May, released this morning (my bold):
- Better than expected mobility in OECD countries and the gradual easing of lockdown measures led to an upward adjustment of 3.2 mb/d to our global 2Q20 demand number; but it is still sharply down on last year by 19.9 mb/d. Although 2H20 will be slightly weaker than previously forecast, our outlook for 2020 as a whole shows a demand fall of 8.6 mb/d, 0.7 mb/d more than in our previous Report. A resurgence of Covid-19 is a major risk factor for demand.
- Global oil supply is set to fall by a spectacular 12 mb/d in May to a nine-year low of 88 mb/d, as the OPEC+ agreement takes effect and production declines elsewhere. For some OPEC countries, e.g. Saudi Arabia, Kuwait and the UAE, lower May production is from record highs in April. Led by the United States and Canada, April supplies from countries outside of the deal were already 3 mb/d lower than at the start of the year.
- The peak decline for global refining activity has shifted to May as our April throughput estimate was revised up on new data and higher demand. In 2Q20, global runs are expected to fall by 13.4 mb/d y-o-y, with 2020 average throughput down by 6.2 mb/d. Signs of refinery storage bottlenecks started multiplying at the beginning of May, with several refineries in Europe, Asia and Africa reported to be closed for an indeterminate period.OECD data for March show that industry stocks rose by 68.2 mb (2.2 mb/d) to 2 961 mb. Total OECD stocks stood 46.7 mb above the five-year average and, due to the weak outlook, now provide an incredible 90 days of forward demand coverage. Preliminary data show that US crude stocks built by 53.7 mb in April (1.8 mb/d), and crude inventories in Europe and Japan also rose by 3.1 mb and 3 mb, respectively. In April, floating storage of crude oil increased by 9.9 mb to 123.8 mb.
- Oil prices fell in April on weak demand due to Covid-19 and record-high Middle Eastern exports. Negative oil futures prices were seen for the first time when NYMEX WTI settled at -$37/bbl the day before the May contract expired. Easing lockdown measures in some countries provided support to gasoline markets; however, jet cracks fell below zero as aviation activity remains depressed. Crude and product shipping costs rose as more vessels were chartered for floating storage.