Crude inventory slump leading to squeezing refinery margins: IEA

The global observed oil inventories fell by 26.2 million barrels in June.

The fall in global crude oil inventories has led to lower refinery margins which could result in a shift in refinery activity in the coming months, said International Energy Agency (IEA) in a report on August 13.

IEA said in the report that oil supply is currently struggling to keep pace with peak summer demand, tipping the market into a deficit. Meanwhile, oil products made gains, supported by large builds in US LPG, it added.

“Preliminary July data suggest this trend continued, with total stocks declining once again as crude inventories lost further ground while oil products made gains. This dynamic is squeezing refinery margins, potentially setting the stage for an upset and shift in refinery activity in the coming months,” said IEA in the report.

According to the report, the global observed oil inventories fell by 26.2 million barrels in June, following four months of builds totalling 157.5 million barrels. OECD onshore stocks declined by 19.5 million barrels but were mostly offset by a 17.5 million barrels increase in non-OECD countries.

The Paris-based agency kept global oil demand growth unchanged from its previous forecast with demand expected to rise by less than 1 million barrels per day (bpd) in both 2024 and 2025. The global oil demand climbed 870,000 bpd in the second quarter of 2024. However, demand contraction in China limited the gains.

Brent crude futures tumbled by $6 per barrel during July amid weak macro-economic data prompted a broad risk-off sentiment across financial markets, outweighing escalating hostilities in the Middle East.

“Questions over the health of the global economy re-emerged as Japan increased interest rates sparking a reversal in yen carry trades, China’s outlook deteriorated and US hiring slowed in July. But persistent geopolitical tensions in the Middle East and some relatively positive macroeconomic data backstopped weakness in oil futures, with prices rebounding higher in the second week of August,” the report said.

The report said the global oil supply rose 230,000 bpd in July to 103.4 million bpd as a substantial OPEC+ increase more than offset losses from non-OPEC+.