Global oil demand will not return to pre-pandemic levels until 2023 and talk of a “super cycle” could be premature: IEA

An oil rig is seen at sunrise on September 9, 2020 in Cromarty, Scotland.
  • By 2021, global oil demand is expected to increase from 5.5 million bpd to 96.5 million bpd, the IEA said.
  • Oil demand will recover around 60% of the volume lost in 2020, but will not return to 2019 levels until 2023.
  • “There is more than enough oil in reservoirs and underground to properly supply world oil markets.”
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The price of oil has recouped its pandemic losses, demand is increasing as more people are vaccinated against COVID-19 and the world’s largest exporters are not increasing production, but it is premature to talk about it. a new super-cycle and massive supply deficits. , according to the International Energy Agency.

The Paris-based IEA expects demand to pick up quickly in the second half of this year, but there are also plenty of opportunities for producers who are currently limiting production to turn on the taps, which means that global demand will not return to its previous level. – pandemic levels for another two years, he said.

Oil’s surge to nearly $ 70 a barrel has sparked discussions of a new super-cycle and a looming supply gap. Our data and analysis suggests otherwise. For starters, oil stocks still appear to be sufficient. from historical levels despite a steady decline from a massive overhang that built up during 2Q20, “the agency said in its monthly report.

The IEA said colder weather and a recovery in industrial activity had helped fuel global demand for oil, which is expected to increase by 5.3 million barrels per day between the first and fourth quarters of this year. .

By 2021, global oil demand is expected to increase from 5.5 million bpd to 96.5 million bpd, recouping about 60% of the volume lost in 2020, the agency said. Oil demand will return to 2019 levels by 2023, he added.

In addition, a stronger economy and the ongoing deployment of COVID-19 vaccines will continue to support demand growth in the second half of the year, which will help close the demand gap at 1.4 million bpd in the last quarter of the year, up from about 4.8 million bpd in the first quarter, according to the IEA.

However, the main driver of the supply / demand balance in the oil market is the Organization of the Petroleum Exporting Countries and their partners, such as Russia and Oman. The group says OPEC + has voluntarily cut production since the impact of the pandemic pushed the price of crude to all-time lows, to as little as – $ 40 a barrel for the U.S. benchmark at any given time.

OPEC + currently retains around 8 million barrels per day of market supply. This is down from the record 9.7 million bpd cut agreed to last spring, but still serves to support the price of oil, which is trading around $ 68 a barrel, rose 170 % last year and is helping to drain global surplus stocks. .

Global <a class=Oil Demand Forecast by Product: IEA” class=”img-responsive” src=””/>
Global Oil Demand Forecast by Product: IEA

The IEA said OPEC’s spare capacity, excluding that of Iran, which is still subject to Trump-era US sanctions on its exports, was 7.7 million bpd in February, while non-OPEC countries that are part of the deal hold an additional $ 1.6 million. bpd that could be on the market “in no time,” the IEA said.

In terms of world supply, the production of non-OPEC + countries will increase by 700,000 b / d after a decline of 1.3 million b / d in 2020, while US oil production will fall by 180,000 b / d. / d, after the drop of 600,000 b / d in 2020, the agency said.

“The prospect of stronger demand and the continued restriction of OPEC + production indicate a sharp drop in inventories in the second half of the year. For now, however, there is more than enough oil. in reservoirs and underground to keep global oil markets properly supplied, ”the agency said.

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Felix J. Dixon