SAT 12 JUNE, 2021-theGBJournal- The International Energy Agency (IEA) Friday-(Oil Market Report – June 2021) said global oil demand is set to return to pre-pandemic levels by the end of 2022, rising 5.4 mb/d in 2021 and a further 3.1 mb/d next year, urging OPEC and its allies to “open the taps” to boost oil production and keep the world well supplied.
The agency is confident that global oil demand will continue to recover and, ‘’in the absence of further policy changes, by end-2022 reach 100.6 mb/d. Non-OPEC+ production is also set to rise, but gains are nowhere near the levels needed to prevent further stockdraws.’’
It said, following a record decline of 8.6 mb/d in 2020, global oil demand is forecast to rebound by 5.4 mb/d in 2021 and a further 3.1 mb/d next year, to average 99.5 mb/d. By end-2022, demand should surpass pre-Covid levels.
In April, OECD total industry stocks fell 61.3 mb below their 2016-2020 average. The pace at which the OPEC+ cuts can be unwound will depend not only on the success in containing the spread of the virus and demand growth but also the timing of the eventual return of Iranian barrels to the market.
IEA reckons that meeting the expected demand growth is unlikely to be a problem. Even after boosting oil production by around 2 mb/d over the May-July period, OPEC+ will have 6.9 mb/d of effective spare capacity.
If sanctions on Iran are lifted, an additional 1.4 mb/d could be brought to market in relatively short order. As for those producers outside the alliance, output growth is set to accelerate from 700 kb/d in 2021 to 1.6 mb/d next year.
The US leads 2022 gains, adding more than 900 kb/d to total supply, followed by Canada, Brazil and Norway. That leaves non-OPEC+ output well above 2019 levels. By contrast, even if OPEC+ producers were to fill the gap created by demand growth, the bloc’s output would still be more than 2 mb/d below the 2019 average.
Crude prices rose on bullish oil fundamentals and financial markets over the past month, while backwardation steepened on both benchmark crude futures contracts reflecting anticipation of tighter markets ahead. North Sea Dated rose $3.95/bbl in May to $68.54/bbl and reached $69.84/bbl in the first week of June. Tanker freight costs remained weak overall during May.
Twitter-@theGBJournal|Facebook-The Government and Business Journal|email: govandbusinessj@gmail.com
