It has revised up its demand fall prediction made in ‘Black April' from 9.3 million barrels of oil per day for the year to 8.6MMbopd as some lockdown restrictions ease more rapidly than expected. 

 

The major uncertainty on the demand side remains a second wave of infections pushing the population back into lockdown and on the supply side the agency questions if OPEC+ members will stick to the production cuts agreed to in April of 9.7MMbopd. 

 

Last month the IEA said ‘Black April' had been like no other month in history, with demand destruction at an unseen level.

 

"The numbers are staggering," executive director Dr Fatih Birol said then, noting demand would contract to 1995 levels. 

 

Now, it is reporting better than expected mobility across the OECD and over a billion people move out of some form of lockdown. 

 

However supply will fall by a "spectacular" 12MMbopd this month to a nine-year low of 88MMbopd thanks to the agreed OPEC+ cuts, and further market-driven production cuts across North America. 

 

"It is on the supply side where market forces have demonstrated their power and shown that the pain of lower prices affects all producers. We are seeing massive cuts in output from countries outside the OPEC+ agreement and faster than expected"

 

These further cuts have been  led by the US and Canada for a combined three million barrels of oil per day in April and the IEA estimates that could reach 4MMbopd by June "with perhaps more to come". 

 

These were not government mandated but a result of poor market conditions and low prices. 

Some attempts to impose state-by-state production cuts in the US, via bodies like the Texas Railroad Commission which have the power to impose cuts, have failed. 

 

Assuming full compliance with the OPEC agreement made the IEA suggests supply will contract by 12MMbopd in May compared to April and further cuts when Saudi Arabia's commitment to cut another 1MMbopd comes into effect in June. 

 

"This means that Saudi production in June will be an extraordinary 4.4MMbopd below April's record level," it said. 

 

It also expects global refining runs for this quarter to be down 13.4MMbopd over the same time last year, and average throughput down 6.2MMbopd. 

 

"Signs of refinery storage bottlenecks started multiplying at the beginning of May, with several refineries in Europe, Asia and Africa reported to be closed for an indeterminate period," it said. 

 

Industry stocks are far up, rising by 68.2MMbbl in March to a total of almost 3Bbbl. Total OECD stocks now equate to a full "incredible" 90 days of forward demand coverage.