DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange edged lower early Monday as traders balanced persistent concerns about weak demand fundamentals in the U.S. and the Eurozone against expectations of tighter supplies in the second half of the year.

Near 7 a.m. EDT, West Texas Intermediate futures for May delivery slipped $0.38 to $82.14 barrel (bbl) and the international crude benchmark Brent for June delivery fell to $85.92 bbl, slipping $0.39 bbl in overnight trading. NYMEX May RBOB futures declined by $0.0342 to $2.8017 gallon, while the May ULSD contract fell $0.0092 to $2.6300 gallon.

The International Energy Agency and Organization of the Petroleum Exporting Countries forecast last week the global oil market will likely slide into a deeper deficit in response to production cuts announced by OPEC+ on April 3. "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 the IEA.

Global oil demand is seen climbing by about 2 million barrels per day (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 the IEA in its Monthly Oil Market Report Friday morning.

Despite a sizable fall in fuel consumption across advanced economies in the first quarter, a solid rebound in China's fuel consumption already lifted worldwide demand 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, the 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.

A similar sentiment was echoed by OPEC in their Monthly Oil Market Report on Thursday, in which the group 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."

Separately, the International Monetary Fund last 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