Global oil demand won’t return to pre-pandemic levels until 2023 and it may be premature to speak of a ‘super cycle’ (IEA)

An oil rig is seen at sunrise on September 9, 2020 in Cromarty, Scotland.
  • For 2021, global oil demand is expected to increase by 5.5 million bpd to 96.5 million bpd, the IEA said.
  • Oil demand will recover about 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 under the ground to ensure an adequate supply for world oil markets.”
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The price of oil has recouped its pandemic losses, demand is picking up as more people are vaccinated against COVID-19 and the world’s biggest exporters aren’t ramping up production, but talk of a new super cycle and Massive supply shortfalls are premature, according to the International Energy Agency.

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

“Oil’s strong rally to near $70 a barrel has sparked talk of a new super cycle and an impending supply shortage. Our data and analysis suggest otherwise. For starters, oil inventories still look plentiful by 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 pick-up in industrial activity helped fuel global oil demand, which is expected to rise by 5.3 million barrels a day between the first and fourth quarters of this year. .

For 2021, global oil demand is expected to increase by 5.5 million bpd to 96.5 million bpd, recovering 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. by the last quarter of the year, compared to around 4.8 million bpd in the first quarter, the IEA said.

However, the main driver of the supply/demand balance in the oil market is the Organization of the Petroleum Exporting Countries and its partners, such as Russia and Oman. The so-called OPEC+ group has voluntarily cut production since the impact of the pandemic pushed the price of crude to historic lows, at as low as -$40 a barrel for the US benchmark at one point.

OPEC+ is currently withholding around 8 million bpd of supply from the market. That’s down from the record 9.7 million bpd cut agreed last spring, but it still serves to support the price of oil, which is trading around $68 a barrel, has risen 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 1.6 million more. bpd that could be on the market “in a short time”, the IEA said.

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

“The prospect of stronger demand and continued OPEC+ production curbs points to a sharp decline 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