While oil prices have been climbing steadily in the past week – with the benchmark Brent crude hitting US$114.10 per barrel – the International Energy Agency has abruptly warned that oil demand growth is slowing.

In its latest Oil Market Report, the IEA said that world oil demand growth in the second quarter is forecast to slow to 1.9 million barrels per day (MMbbl/d) from 4.4MMbbl/d in the first quarter.

This is expected to ease further to an average of 490,000bbl/d in the second half of 2022 due to a more tempered economic expansion and higher prices, leading to an average increase of just 1.8MMbbl/d in 2022.

On the supply side, it noted that while Russia had shut-in nearly 1MMbbl/d of production in April, which took total global production down to 98.1MMbbl/d, steadily rising volumes from the Middle East, the broader OPEC+ countries and the US are “expected to fend off an acute supply deficit amid a worsening Russian supply disruption”.

And while Germany has declared its attention to go it alone with a Russian oil ban, several European Union members – all heavily reliant on Russian oil – have already flagged their opposition to any EU-wide ban.

Taken together, there is a chance that this could cause oil prices to fall.

And there’s more. Despite the noticeable lack of progress around reaching a new nuclear deal with Iran, the oil producer has indicated that it could drastically increase production.

Bloomberg quoted the National Iranian Oil Co. managing director Mohsen Khojastehmehr as saying that Iran could easily double exports if needed in order to recapture its share of the crude oil market.

Should negotiations resume and reach a favourable conclusion, this could go a long way towards alleviating any concerns about declining Russian oil production and put further pressure on prices.

On the other hand, Chinese oil demand may well rebound if Shanghai comes out of lockdown – a scenario that is looking increasingly likely with the city seeing a strong recovery in Covid cases.

Whether this will be enough to offset the projected slowdown in demand globally is certainly up for debate.