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According to Gibson, “for products, the picture is less clear. Preliminary trade data from Kpler shows that Russian clean product exports in the West averaged at a healthy 1.5 mbd in February, with notable increases in shipments to Turkey, North and West Africa and the Middle East. Although absolute volumes are down by around 10% month-on-month, they are largely in line with the average level of Russian clean product exports seen in 2022. However, we cannot rule out the possibility that at least a portion of Russian products exported in February is destined for storage terminals, with these barrels yet to find their ultimate home. Another factor that has kept a lid on oil prices is a struggling oil demand in advanced economies in the West, with 4Q22 demand down year-on-year and 1Q23 consumption estimates so far not showing any significant improvements”.
“Yet, whilst concerns about the global economy dominated last year, now we may well be at the start of a new chapter. Much of this optimism has been stoked by China dramatically abandoning its zero-Covid policy in late 2022, with the impact of policy changes already being felt. China’s manufacturing activity registered in February its fastest growth in more than a decade, with the country’s official manufacturing sector purchasing managers’ index jumping to 52.6 last month from 50.1 in January, its highest level since 2012. China’s rebound from its Covid-related restrictions will undoubtedly support global oil consumption this year. In its latest report, the IEA puts global oil demand growth this year at 2 mbd, with China accounting for nearly 50% of the total gain”, the shipbroker said.
Gibson added that “it could be challenging for global oil markets to meet this rising demand, particularly considering ongoing OPEC+ production cuts. Absolute levels of Russian crude production is also a concern, with the country floating the idea in early February that it would cut its crude production levels by 500 kbd in March and reduce exports from Western terminals by 25%. Here, any further decline in production and export levels will only contribute to a tightening oil supply and demand balance”.
“Earlier this week, Vitol’s chief executive said in a Bloomberg interview that oil demand is likely to reach record levels in the 2nd half of this year. With consumption climbing and the market tightening, “the prospect of higher prices in the second half of the year, in the sort of $90-$100 range, is a real possibility.” Drilling further in terms of numbers, the IEA expects non-OPEC oil supply to expand by 1.2 mbd in 2023, led by production increases in the United States, Brazil, Norway, Canada and Guyana. This means that sizable incremental volumes by OPEC Middle East producers and/or even Russia will also be needed to meet the expected growth in demand. If not, we could see a significant tightening in oil markets, another major drawdown in oil inventories and the renewed upward pressure on prices. Perhaps a bit of both is more likely”, Gibson concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide
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