Global Crude Oil Demand Continues to Decelerate: IEA

"Persistent demand weakness in China considerably slowed the pace of a summer ramp-up in refining activity. After reaching a post-Covid peak in August of 81.4 million barrel per day, refinery throughputs are expected to fall in September-October on seasonal maintenance," it said.

With lower runs (the volume of crude oil consumed by refineries), refined product inventories are now unlikely to see any substantial builds for the remainder of the year.

Brent crude oil futures prices slipped below USD 90 per barrel in early September, the lowest level since January and more than USD 34 barrel below a June peak. This is the largest 90-day decline since March-April 2020 and is only exceeded prior to 2020 by market routs in 2014-15 and 2008-09.

For now, a deteriorating economic environment and recurring Covid lockdowns in China continue to weigh on market sentiment, it said.

However, the deceleration in crude oil intake is partly offset by large-scale switching from gas to crude oil, estimated to average 700 kb/d during October-December 2022 and January-March 2023, double the level of a year ago, the agency said in the report.

Coming to global demand for crude oil in 2022, it is expected to rise by 2 million barrel per day and 2.1 million barrel per day in 2023, marginally lower than its last month's forecast.

"World oil production rose 790 kb/d in August to 101.3 mb/d, with a strong recovery in Libya and smaller gains from Saudi Arabia and the UAE offset by losses in Nigeria, Kazakhstan and Russia. From August through December, growth is forecast to slow, edging up by just 280 kb/d to 101.6 mb/d. In 2022, global production is forecast to rise by 4.8 mb/d, to 100.1 mb/d, and by 1.7 mb/d in 2023 to 101.8 mb/d," it said.

However, the EU embargo on Russian crude oil and product imports that comes into effect in December 2022 and February 2023, respectively, is expected to result in deeper declines, it added.