Economic indicators are strong as global oil stocks continue to decline

Oil prices recorded their first weekly gain after three straight weeks of decline, despite the growing number of COVID-19 cases and additional travel restrictions.

The Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) have both improved their outlook for oil demand after huge drawdowns from oil stocks in member states of the Organization for Economic Co-operation and Development (OECD), supported by a recovering global economy that is largely supported by unprecedented monetary and fiscal stimuli.

At the close of the week, oil prices hit a one-month high: Brent crude hit $ 66.77 per barrel and West Texas Intermediate hit $ 63.13 per barrel. Trading above $ 60 a barrel for both benchmarks, and with Brent crude prices averaging nearly $ 61 in 2021 so far, represents a huge recovery a year after “Black April,” when the pandemic caused the biggest oil demand shock in history.

The IEA and OPEC monthly oil reports both pointed to huge declines in commercial oil stocks in OECD countries for the seventh consecutive month in February. They pointed to a massive drop in global oil stocks that accumulated during last year’s COVID-19 demand shock for data collected for February. This has resulted in a further decline in global oil stocks in the coming months.

The IEA said stocks of the OECD industry fell from 55.8 million barrels in February to 28.3 million above the 2016-2020 average. OPEC reported that OECD commercial stocks fell 44.9 million barrels in February, to 30.8 million above the last five-year average and 42 million above the 2015-2019 average.

Economic indicators are more robust as global oil stocks continue to decline. As a result, OPEC and IEA have raised forecasts for global oil demand as the economic recovery gathers pace.

The IEA predicts dramatic changes in global oil markets in the second half of this year, as nearly 2 million barrels per day (bpd) of additional supply may be needed to meet the expected growth in demand, even after taking into account the announced ramp-up of OPEC +. production as the high demand summer driving season is fast approaching.

The IEA’s global oil demand in 2021 is expected to reach 96.7 million bpd, up 5.7 million bpd from 2020 despite weaker than expected data for the first quarter.

OPEC’s global oil demand growth in 2021 is expected to increase by around 6 million bpd, which is an upward revision of just 100,000 bpd from last month’s report. Although this is a very small revision, it marks an upward change from previous months of weaker demand forecasts due to continued lockdowns.

However, OPEC’s cautious approach has remained intact given the fragile and uncertain recovery in oil demand that would require vigilant monitoring of market developments, including the possibility of an increase in sovereign debt in most areas. savings, and a further potential rise in inflation that could tighten monetary policies.

The latest Commodity Futures Trading Commission figures from April 13 showed long positions in crude oil futures on the New York Mercantile Exchange at 645,593 contracts, down 9,735 from the previous week ( 1,000 barrels for each contract). This is the fifth consecutive weekly decline in positions.
Source: Arab News

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Felix J. Dixon