IEA Oil Market Report - July

[dan_s]

MY OPINION: IEA is now a political organization that intentionally understates oil demand growth.

FWIW here are the Highlights of IEA's report for July.

> World oil demand growth is forecast to increase by 700 kb/d in 2025, its lowest rate since 2009, with the exception of the 2020 Covid year. Annual growth eased from 1.1 mb/d in 1Q25 to just 550 kb/d in 2Q25, with emerging market consumption particularly lacklustre. Global oil demand is projected to expand by 720 kb/d to reach 104.4 mb/d in 2026. < My WAG is that both forecasts are about half of what's really going to happen.

> Global oil supply increased by a steep 950 kb/d m-o-m to 105.6 mb/d in June, led by Saudi Arabia. Output was up by 2.9 mb/d y-o-y, of which OPEC+ accounted for 1.9 mb/d. With higher OPEC+ targets for August, world oil supply is projected to rise by 2.1 mb/d to 105.1 mb/d this year and by an additional 1.3 mb/d in 2026, with non-OPEC+ adding 1.4 mb/d and 940 kb/d, respectively.

> Following a 1.7 mb/d monthly increase in June, global refinery runs are set to rise by a further 2 mb/d over July and August, to reach a seasonal peak of 85.4 mb/d. Runs will increase by 500 kb/d in 2025 and 460 kb/d in 2026, to an average 83.3 mb/d and 83.8 mb/d, respectively. Refining margins eased in June, as crude prices rallied but subsequently recovered to multi-month highs in early July, led higher by stronger diesel cracks.

> Observed oil inventories surged by 73.9 mb to 7 818 mb in May, led by OECD commercial product inventories and crude in non-OECD countries. Crude, NGLs and feedstocks were up for the fourth month in a row, by 49.7 mb, in large part due to a sharp rise in China, while oil products increased for the first time this year, by 24.2 mb. Preliminary data for June showed global oil stocks rose further, mainly in oil on water and the non-OECD.

> North Sea Dated crude increased by $7/bbl m-o-m to an average $71.35/bbl in June after trading in a wide $65-$80/bbl range. Israel’s mid-month air strikes on Iranian military and nuclear targets sent prices soaring, with Dated briefly surpassing $80/bbl but easing after a ceasefire was agreed. The decision by OPEC+ to further accelerate the unwinding of production cuts failed to move markets in a meaningful way given tighter fundamentals.

Disconnects

Benchmark crude oil prices rose by around $7/bbl on average in June, trading in a wide range between $65/bbl and $80/bbl. Israel’s air strikes on Iranian military and nuclear targets sent prices soaring mid-month, with North Sea Dated briefly surpassing $80/bbl before returning to pre-conflict levels after a ceasefire accord was reached. At the time of writing, Dated was trading just above $72/bbl, down $15/bbl on a year ago.

Escalating geopolitical tensions were set against a backdrop of an apparently oversupplied market. In June, global oil production rose by 950 kb/d m-o-m to 105.6 mb/d – a substantial 2.9 mb/d above year-ago levels. On 5 July, the OPEC+ alliance announced a larger-than-expected ramp-up in targets for August, of 550 kb/d, effectively unwinding 80% of the 2.2 mb/d voluntary production cuts in place since 2023. Reports suggest the group may follow-up with the same outsized increase in September, which will complete the planned return of supply a full year ahead of the original schedule. World oil supply is now forecast to rise by an average 2.1 mb/d this year to 105.1 mb/d and by a further 1.3 mb/d to 106.4 mb/d in 2026, with non-OPEC+ producers dominating growth at 1.4 mb/d and 940 kb/d, respectively.

These large supply increases compare with modest expected growth in global oil demand of around 700 kb/d in 2025 and 720 kb/d in 2026, reaching 104.4 mb/d. Yet the seasonality in crude runs to meet Northern Hemisphere summer travel demand is boosting refinery throughputs by 3.7 mb/d from May to August. The typical doubling in crude burning for power generation over the same period, to around 900 kb/d, further tightens the market.

Price indicators also point to a tighter physical oil market than suggested by the hefty surplus in our balances. Prompt time spreads are in steep backwardation and refinery margins remain healthy despite implied stock builds of 1.74 mb/d in 2Q25. However, observed builds are heavily concentrated in Chinese crude oil and US gas liquids stocks, masking draws elsewhere. US gas liquids inventories rose by 79 mb in 2Q25, buoyed by robust US NGL supply and lower exports due to a temporary export license requirement for ethane. China’s crude oil stocks surged by 82 mb in 2Q25, or almost 900 kb/d. China’s new policies aimed at improving its energy security are positioning oil companies as long-term strategic storage partners for the government, effectively removing these volumes from the global market. Chinese companies are expected to continue driving the expansion of inventories, with the pace of stock building over coming months key to the market balance.
-------------------------
If this sounds like a lot of Wild Ass Guesses to you, you are not alone.

The OPEC+ demand estimates sound a lot more accurate to me.