DTN Oil

WASHINGTON, D.C. (DTN) -- West Texas Intermediate futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled Friday's session with modest gains, while all petroleum contracts notched their fourth consecutive weekly advance after International Energy Agency and Organization of the Petroleum Exporting Countries said the world oil market will slide into a deeper deficit in the second half of the year as demand growth propelled by China's reopening is seen outpacing gains in global oil production.

At settlement, WTI futures for May delivery added $0.36 to $82.52 bbl and international crude benchmark Brent for June delivery advanced to $86.31 bbl, gaining $0.22 on the session. NYMEX May RBOB futures edged higher by $0.0042 to $2.8359 gallon, while the May ULSD contract fell $0.0336 for a $2.6392 gallon settlement.

Global oil demand will climb by about 2 million bpd this year to a record 101.9 million bpd, with 90% of that growth realized in developing and emerging economies led by China, said IEA in its Monthly Oil Market Report Friday morning.

"Our oil market balances were already set to tighten in the second half of 2023, with the potential for a substantial supply deficit to emerge," said IEA.

Despite a sizable fall in fuel consumption by countries in the Organization for Economic Cooperation and Development in the first quarter, a solid Chinese rebound already lifted worldwide consumption 810,000 bpd above year-ago levels to 100.4 million bpd, said IEA. The agency expects a further increase of 2.7 million bpd in global oil demand through year-end, propelled by a continued recovery in the Asian region.

For advanced economies, IEA acknowledged that weakness in industrial activity is impacting diesel demand, whereas the services sector and personal consumption are driving gasoline and jet uptake.

"Consumers confronted by inflated prices for basic necessities will now have to spread their budgets even more thinly. This augurs badly for the economic recovery and growth," said the IEA.

Similar sentiment was echoed by OPEC in their Monthly Oil Market Report on Thursday, where the cartel left 2023 demand projections unchanged at 101.9 million bpd despite acknowledging risks tied to the banking stress in the United States and Eurozone.

OPEC said its forecast for demand growth across OECD countries was revised down for all four quarters, but consumption in non-OECD countries was boosted in part by "better-than-expected improvements in economic activity in China after it dropped its zero-COVID policy."

OPEC and its allies, known as OPEC+, earlier this month announced more than 1.2 million bpd in production cuts from May through the end of the year.

IEA warned that OPEC+ cuts would press world oil production lower by 400,000 bpd towards the end of the year. From March to December, expected gains of 1 million bpd from non-OPEC+ countries will fail to offset a 1.4 million bpd decline from the producer bloc. For the year, global oil production growth slows to 1.2 million bpd versus 4.6 million bpd in 2022.

Separately, International Monetary Fund earlier this week downgraded its global growth forecast to 2.8% for this year from 3.4% in 2022, while forecasting a median of 3% expansion over the next five years -- the lowest growth rate since the 1990s. Advanced economies in North America and the European Union will likely suffer the sharpest slowdown from 2.7% in 2022 to 1.3% this year, reflecting tight policy stances needed to bring down inflation, the fallout from the recent deterioration in financial conditions and growing geoeconomic fragmentation.

"Risks to the outlook are heavily skewed to the downside, with the chances of a hard landing having risen sharply," said the IMF.

Liubov Georges can be reached at liubov.georges@dtn.com