We’re seeing a divergence between Atlantic and Pacific basin inventories.

Inventories in the Atlantic basin, which had been building, have now flatlined. In contrast, the Pacific basin is experiencing a slight drawdown after recent increases. China is the most significant factor here, and its lack of a massive inventory drawdown is tempering bullishness in oil prices. However, our data indicates a marked decline in crude oil at sea, suggesting signs of global crude supply tightness in the short term.

How supportive has the disruption of global flows been to oil prices?

On the shipping side, there hasn’t been any significant change in the way oil moves on the water in recent months. The world understands that shipping remains more inefficient in global trade for oil and products. One of the main routes affected is the diesel flow from east to west. Europe hasn’t been importing much diesel from the East in recent months, but any increase in European demand, particularly during a strong winter, could tighten freight rates and push up diesel prices in the West. This situation could also lead to larger tankers, like Suezmaxes and VLCCs, being cleaned to carry diesel, a phenomenon already happening on a small scale but potentially increasing in the coming weeks and months.

Is the sanctioned or “Dark Fleet” impacting oil flows?

This primarily includes Iran and Venezuela. Iran’s exports have continued to rise, hitting 1.7 million b/d in May. Russia has shifted more exports towards India at the expense of China, due to China’s lower oil import demand. As a result, India’s imports of Russian oil are at record levels, impacting the imports of Middle Eastern grades previously bought by India.

Outlook for oil demand growth?

It’s looking like the market is leaning towards the lower side of forecasts, largely due to disappointing oil import data from China. This trend is unlikely to change significantly in the next six months. On the supply side, OPEC’s latest announcements indicate no major production increases until September 2025, when Saudi Arabia and UAE could potentially add up to 1.5 million b/d. Until then, the tight supply side supports a slightly bullish narrative on prices, but the lack of bullishness from China remains a significant factor.