Switch from gas increases oil demand, but financial headwinds threaten

August 12, 2022: -On Thursday, Humid summer temperatures and increased gas prices have increased the use of oil in power years, the International Energy Agency said, which increased demand but masking weakness in economies beset by recession worries.

“Natural gas and electricity prices have been soaring to new records, incentivizing gas-to-oil switching in some countries,” the Paris-based agency said in its oil report of this month, expanding its outlook for 2022 demand by 380,000 barrels for each day (BPD).

“These extraordinary gains, overwhelmingly concentrated in the Middle East and Europe, mask relative weakness in other sectors,” the IEA warned.

It cited decreased use of fuels for road transport in developed countries and restricting growth by the year’s end, “aligning with the more negative economic idea to show a considerable 2H22 contraction”.

Meanwhile, the global oil supply in July broke beyond pre-pandemic highs, buoyed by more than anticipated output by Russia exporting. The IEA said it came down by 115,000 BPD in July to 7.4 million BPD, a plunge of just 600,000 BPD from the start of the year.

Russian oil export revenues were down $2 billion in July to $19 billion primarily because of lower prices, and the IEA faded that China overtook Europe for the initial time as the leading goal for crude Russia.