Recently there has been an excellent piece on Bloomberg explaining why oil prices have been struggling due to supply rather than demand issues. The logic in the article by Javier Blas has been that sanctions by Western countries on Iran, Russia, and Venezuela have not really worked. Instead, the sanctions have helped fuel a black market that is hungry for oil. This point was further highlighted by the latest IEA report which stated that recent developments such as the Iraq-Turkey export pipeline, Canadian wildfires, Nigerian protests, and maintenance-related cuts in Brazil have had little impact. These events have not caused a significant price spike or a noticeable decline in inventories, as stated by the IEA. So, is this a supply issue mainly from Russia and Iran that is sending oil lower? Oil prices have fallen around 25% this year and over 40% from last summer.

Supply remains the issue, not demand

According to Bloomberg, Iranian production hit a four-year high in April and much of that oil is ending up in China and being rebranded as originated from Malaysia. The IEA projected that Russian oil output would fall to 8.71 million barrels per day, but Russia produced nearly 11 million barrels per day in April. So, Iranian and Russian supply is still getting to market and that is why oil prices have remained pressured.

Demand is still expected to grow

According to Goldman Sachs, the latest IEA report held more bullish signs for oil. The IEA has revised its global demand growth forecast for 2023 increasing it by 100k BPD compared to the previous report. Goldman saw the report in contrast to the current market pessimism with the IEA anticipating tighter market balances in the second half of the year and highlighted China’s demand recovery exceeding expectations. Bloomberg points out that the combined demand of China and India (21.4 million bpd) is expected to be larger than the US (20.3 million bpd).


Oil’s recent dips may well be the last before a summer surge if the US avoids a hard landing. From a technical perspective as long as key support holds on the monthly chart that keeps the outlook alive for buyers.