Macro oils short-term outlook: May 2022 Report

Commodity Market Report 05 May 2022

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Report summary

We are continuing to emphasize the risk to oil production in Russia under the duress of unprecedented sanctions. The EU is near a decision to ban imports of oil from Russia by end-2022. The demand recovery is facing stagnation in Q2 2022 amid elevated prices and China’s Covid-19 restrictions and risks are skewed to the downside for the remainder of our outlook. In this Monthly Update, our forecast for Russia oil supply has been revised downward to reflect the growing logistical challenges and its sharp decline in domestic refining runs. Oil exports from Russia have remained steady into early May but we expect pressure on these could escalate. Read our latest short-term update for more on the evolving global oil market: • What do China’s Covid lockdowns mean for demand? • Impact on trade from an EU ban on Russia oil imports • How close are we to our Recession Case Scenario? • Finally, growth for sluggish US Lower 48 supply

Global supply: base case outlook for Russia supply again lowered substantially
- Russia: new EU sanctions under discussion as production declines sharply in April
- Non-OPEC supply: downgrades to Russia, Norway and GoM offset upgrades to China and Kazakhstan
- US Lower 48: drilling activity remains strong, but completions slow
- OPEC: Libya oil blockade outages slow OPEC growth in Q2
Global demand: Global oil demand struggles in 2022 under the weight of China lockdowns and inflation pressures
- 2022: China restrictions and squeezed petrochemical margins hit gasoline and naphtha demand as recovery retracts in H1 2022
- 2023: Global demand to approach 102 million b/d as light ends demand weakness extends into next year
- Key changes/developments in regional outlooks
- Asia Pacific
- North America
- Europe
- Middle East
- Risks to the outlook