The oil market's real weakness is supply, not demand | The Business Standard
Skip to main content
  • Latest
  • Economy
    • Banking
    • Stocks
    • Industry
    • Analysis
    • Bazaar
    • RMG
    • Corporates
    • Aviation
  • Videos
    • TBS Today
    • TBS Stories
    • TBS World
    • News of the day
    • TBS Programs
    • Podcast
    • Editor's Pick
  • World+Biz
  • Features
    • Panorama
    • The Big Picture
    • Pursuit
    • Habitat
    • Thoughts
    • Splash
    • Mode
    • Tech
    • Explorer
    • Brands
    • In Focus
    • Book Review
    • Earth
    • Food
    • Luxury
    • Wheels
  • Subscribe
    • Get the Paper
    • Epaper
    • GOVT. Ad
  • More
    • Sports
    • TBS Graduates
    • Bangladesh
    • Supplement
    • Infograph
    • Archive
    • Gallery
    • Long Read
    • Interviews
    • Offbeat
    • Magazine
    • Climate Change
    • Health
    • Cartoons
  • বাংলা
The Business Standard

Friday
July 25, 2025

Sign In
Subscribe
  • Latest
  • Economy
    • Banking
    • Stocks
    • Industry
    • Analysis
    • Bazaar
    • RMG
    • Corporates
    • Aviation
  • Videos
    • TBS Today
    • TBS Stories
    • TBS World
    • News of the day
    • TBS Programs
    • Podcast
    • Editor's Pick
  • World+Biz
  • Features
    • Panorama
    • The Big Picture
    • Pursuit
    • Habitat
    • Thoughts
    • Splash
    • Mode
    • Tech
    • Explorer
    • Brands
    • In Focus
    • Book Review
    • Earth
    • Food
    • Luxury
    • Wheels
  • Subscribe
    • Get the Paper
    • Epaper
    • GOVT. Ad
  • More
    • Sports
    • TBS Graduates
    • Bangladesh
    • Supplement
    • Infograph
    • Archive
    • Gallery
    • Long Read
    • Interviews
    • Offbeat
    • Magazine
    • Climate Change
    • Health
    • Cartoons
  • বাংলা
FRIDAY, JULY 25, 2025
The oil market's real weakness is supply, not demand

Bloomberg Special

Javier Blas, Bloomberg
18 May, 2023, 06:15 pm
Last modified: 18 May, 2023, 06:22 pm

Related News

  • Oil wealth — a curse or a blessing?: The Middle East's trade-off with American power
  • Oil prices rise as investors assess Iran-Israel ceasefire
  • Oil rises as Iran-Israel conflict spurs uncertainty
  • Could Iran's threat to close Strait of Hormuz escalate conflict with Israel?
  • Probable Hormuz channel closure: Bangladesh's fuel imports at risk

The oil market's real weakness is supply, not demand

Sanctioned producers are finding ways to get their crude to market

Javier Blas, Bloomberg
18 May, 2023, 06:15 pm
Last modified: 18 May, 2023, 06:22 pm
Photo: Bloomberg
Photo: Bloomberg

Purveyors of conventional wisdom would have you believe that the 25% drop in oil prices since late last year was due to softening demand in slowing economies. They – and you – would be wrong. The real problem is too much supply.

Paradoxically, almost all the unanticipated production is coming from OPEC+ countries that are under Western sanctions: Russia, Iran and, to a lesser extent, Venezuela. Put simply, the black market for oil is booming. If one has the appetite – and the stomach – to buy crude from Moscow, Caracas or Tehran, the barrels are there. Better yet, they're available at a discount.

For instance, Iranian production hit a four-year high last month, up nearly 50% from mid-2020, just as Tehran accelerates its nuclear program and intensifies a crackdown on domestic opposition. Much of that oil is ending up in China under different guises, often rebranded as originating in Malaysia, traders tell me.

The Business Standard Google News Keep updated, follow The Business Standard's Google news channel

Supply up, prices down

Oil prices have fallen 25% since late 2022 as output from Russia, Venezuela and Iran – all under sanctions – has proved stronger than expected

Data from the Paris-based International Energy Agency, which publishes benchmark supply and demand balances monthly, provides the big picture. 

Compared to six months ago, the IEA has lifted its forecast for 2023 global oil demand by nearly 400,000 barrels a day, reaching a record annual daily average of 102 million barrels. Let that sink in: even as the Federal Reserve and the European Central Bank increased interest rates, and Wall Street predicted a recession, the outlook for oil demand has only strengthened.

Perhaps the IEA is overoptimistic and oil demand growth will slow. But its forecast already incorporates a pessimistic outlook for diesel, the fuel most exposed to the business cycle. The current IEA forecast for a 2.2 million-barrel-a-day increase in oil consumption this year comes despite its view that global diesel demand will contract.

Right now, the oil market is paying too much attention to the political and economic ups and downs in Washington. True, the US is still the world's largest oil consumer, swallowing two of every 10 barrels pumped worldwide. But America isn't the oil market. Its consumption lead has narrowed significantly in recent years, and in 2023 the combined consumption of China and India (21.4 million barrels a day) is expected to be larger than the US (20.3 million). 

The strength in the developing world matters. "We are seeing very strong demand, especially in Asia. Chinese recovery has been faster and stronger than expected," Toril Bosoni, the IEA's head of markets, told Bloomberg Television on Tuesday. "This is contrasting with the sort of economic gloom and the concerns we see for the global economy."

The real problem for the oil bulls – and countries like Saudi Arabia eager for higher prices – is supply and the need for cash in sanctioned producers. Over the last six months, the IEA has lifted its forecast for Russian, Iranian and Venezuelan output in 2023 by a combined 1.3 million barrels a day, reaching an annual average of 14.3 million barrels a day.

As with demand, there are risks to the supply outlook. Perhaps the agency is over-optimistic about Russia's ability to pump extra crude. But, if anything, the IEA has been too pessimistic about Moscow since it invaded Ukraine more than a year ago. A year ago, for example, the agency predicted that Russian output would plunge in 2023 to an annual average of 8.71 million barrels a day. In April, Russia produced about 10.93 million barrels a day. To reach an annual average of 10.73 million, as the IEA is now expecting, Russian production would need to decline. It may happen, as Moscow has promised to cut its production. But so far, it hasn't delivered on the cut, and I expect it would continue to pump at will, trying to make up via volume what it's losing due to lower prices.

Is the extra supply from Russia, Venezuela and Iran a sign that the Western sanctions aren't working? No. It's a sign the sanctions prioritise keeping the oil market well supplied, even if that means that Moscow, Tehran and Caracas can sell oil. Ignore Western politicians talking about using sanctions to cripple rogue petro-dictators; what they want is to cripple inflation. For now, the strategy has worked. It remains to be seen if it will survive the summer, when oil demand growth is likely to accelerate.


Disclaimer: This article first appeared on Bloomberg, and is published by special syndication arrangement.

Top News / World+Biz / Global Economy

Oil / oil market

Comments

While most comments will be posted if they are on-topic and not abusive, moderation decisions are subjective. Published comments are readers’ own views and The Business Standard does not endorse any of the readers’ comments.

Top Stories

  • Infographics: TBS
    Inflated rents, ghost floors, Tk220cr advance: How Premier Bank funds lined Iqbal family’s pocket
  • On 21 July, a Bangladesh Air Force (BAF) F-7 BGI training fighter jet crashed into Milestone School and College in Uttara, killing at least 31. Photo: Mehedi Hasan
    Milestone tragedy: Death toll rises to 32 as another child dies
  • File photo of a new NBR office in Agargaon, Dhaka. Photo: UNB
    Clear consignments in a day, customs officials directed

MOST VIEWED

  •  ABM Khairul Haque. File Photo: Collected
    Former chief justice Khairul Haque detained
  • File photo of Bangladesh Bank. Photo: TBS
    Governor Mansur orders withdrawal of BB dress code after directive draws criticism
  • Hasina and Taposh in an event in 2020. Photo: Collected
    Al Jazeera investigation: Hasina, in call with Taposh, talks using helicopter to shoot, crush protesters in July uprising
  • Representational image. File photo: TBS
    Govt okays proposed tariff structure for Chattogram Port, rates to rise by up to 440%
  • Representational image. Photo: Collected
    Tariff talks: Bangladesh, US set for crucial virtual meeting on 29 July
  • Mehreen Ahmed speaking to media on 11 July 2025. Photo: Collected
    Court disposes of Dhaka girl's case against parents seeking 'protection from abuse'

Related News

  • Oil wealth — a curse or a blessing?: The Middle East's trade-off with American power
  • Oil prices rise as investors assess Iran-Israel ceasefire
  • Oil rises as Iran-Israel conflict spurs uncertainty
  • Could Iran's threat to close Strait of Hormuz escalate conflict with Israel?
  • Probable Hormuz channel closure: Bangladesh's fuel imports at risk

Features

Illustration: TBS

The future of medicine: How innovations will catalyse quantum leaps in healthcare by 2055

16h | The Big Picture
Photo: Collected

24 July: More than 1400 arrested, 3 missing coordinators found

1d | Panorama
Photo: Mehedi Hasan/TBS

Aggrieved nation left with questions as citizens rally to help at burn institute

2d | Panorama
Photo: Mehedi Hasan/TBS

Mourning turns into outrage as Milestone students seek truth and justice

2d | Panorama

More Videos from TBS

All Previous Records Broken in Dinajpur, Rice Prices Are Rising

All Previous Records Broken in Dinajpur, Rice Prices Are Rising

1h | TBS Stories
There are many more examples of trials of Chief Justices in the world.

There are many more examples of trials of Chief Justices in the world.

14h | TBS Today
Why is there a massive conflict between Thailand and Cambodia?

Why is there a massive conflict between Thailand and Cambodia?

14h | TBS News Updates
Former Chief Justice ABM Khairul Haque in prison

Former Chief Justice ABM Khairul Haque in prison

14h | TBS Today
EMAIL US
contact@tbsnews.net
FOLLOW US
WHATSAPP
+880 1847416158
The Business Standard
  • About Us
  • Contact us
  • Sitemap
  • Advertisement
  • Privacy Policy
  • Comment Policy
Copyright © 2025
The Business Standard All rights reserved
Technical Partner: RSI Lab

Contact Us

The Business Standard

Main Office -4/A, Eskaton Garden, Dhaka- 1000

Phone: +8801847 416158 - 59

Send Opinion articles to - oped.tbs@gmail.com

For advertisement- sales@tbsnews.net