The International Energy Agency (IEA) announced a recovery in global oil demand, with consumption set to rise from its May low. This positive trend comes as supplies tentatively start moving through the strategic Strait of Hormuz again and oil prices ease. The IEA's monthly report highlighted that world oil demand is on the mend, contrary to earlier predictions of a significant fall due to the Middle East war.
Improved Supply and Lowered Demand Projections
In June, the IEA had predicted a fall in demand of 1.1 million barrels a day (mbd) through 2026 due to the Middle East war. However, it now expects a one million barrel a day fall, indicating a more optimistic outlook. Global oil supply rebounded by a sharp 4.1 mbd to 98.8 mbd in June, driven by a resumption of flows through the Strait of Hormuz, which has partially recovered Gulf production.
Gulf Oil Exports and World Output
Total Gulf oil exports, including volumes bypassing the Strait, surged by 6.5 mbd in June to 16.1 mbd—a significant increase but still well below the 24 mbd average before the war started. World output was nevertheless some 9.4 mbd below pre-war levels. The IEA noted that world supply improved to 102.6 mbd in June and would continue to get better if there was 'a swift de-escalation of renewed hostilities'.
Oil Reserves and Market Outlook
According to the IEA, world oil reserves increased for the first time since the US-Israeli attacks on Iran on February 28 set off the war. Stocks in the richest nations had fallen as their oil imports remained low despite the rise in volumes being transported by sea. While oil prices fell dramatically in June, fresh fighting between US and Iranian forces this week 'clouds the outlook', the IEA said.
Significance for Bangladesh
For Bangladesh, which relies heavily on imported oil for its energy needs, the recovery in global oil demand and the easing of prices are positive developments. Lower oil prices can help reduce the country's import bill and ease inflationary pressures. Additionally, improved global supply chains can ensure more stable and reliable oil imports, which are crucial for the country's economic stability.
Future Projections and Risks
The IEA added that if transit volumes improve, oil supply will expand by 7.5 mbd next year. However, renewed exchanges of fire in the Gulf this week highlight the risks of not reaching a lasting peace agreement, which is essential for the normalization of oil markets. The agency stressed the need for a lasting peace to ensure the stability of global oil markets.
