IEA: Oil in transit reaches record highs due to shipping disruptions

Shipping disruptions through the Red Sea are pushing the amount of oil in transit to record levels, according to the latest International Energy Agency (IEA) Oil Market Report (OMR).

Illustration. Courtesy of Euronav

With oil tankers taking the longer route around Africa, more oil was kept on water.

In February alone, oil on water surged by 85 mb as repeated tanker attacks in the Red Sea diverted more cargoes around the Cape of Good Hope. At nearly 1.9 billion barrels as of end-February, oil on water hit its second highest level since the height of the Covid-19 pandemic.

As explained, record global oil exports and shifting trade patterns following Russia’s invasion of Ukraine and unrest in the Middle East have caused the amount of oil in transit to be at the highest levels on record.

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On top of the rerouting of much of Russia’s oil exports, many ships are now avoiding the Red Sea following a number of tanker attacks in recent months. The amount of oil being transported via the Suez Canal declined by 50% in February compared with the same month in 2023. As a result, trade using other routes has surged.

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The trade shifts are leading to a higher demand for bunker fuel for ships. Singapore, the major global center for maritime refueling, has seen bunker sales reach all-time highs since December. Longer shipping routes and faster vessel speeds saw Singapore bunkering set the new record.

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“These trends contributed to a slight upward revision of our forecast for global oil demand growth in 2024, from 1.2 million to 1.3 million barrels per day. Nonetheless, demand growth is still on track to slow significantly from the 2.3 million barrels per day seen in 2023,” the IEA said.

“At the same time, according to our latest forecast, if voluntary oil output cuts by OPEC+ countries remain in place throughout the whole of 2024, the global supply balance for the year will shift from a surplus to a slight deficit – though some relief might arrive as the massive volumes of oil in transit reach their final destinations.”

The Organization of the Petroleum Exporting Countries said in its Monthly Oil Market Report for March 2024 that the global oil demand growth forecast for 2024 remains unchanged and stands at 2.2 million barrels per day (bpd) in 2024.

In 2025, global oil demand is expected to see robust growth of 1.8 million barrels per day, y-o-y.