OPEC and IEA see bullish oil demand in 2021. Why they are there

The recovery from the pandemic is accelerating rapidly, at least on the basis of searing demand in the oil market.

The International Energy Agency and OPEC forecast higher demand for oil in 2021 – the IEA said this week that producers may have to increase supply by 2 million barrels per day to catch up with demand, while that OPEC raised its own forecast to 5.95 million barrels per day for the year.

The mayor of Regina, global energy manager at KPMG, says the forecast is correct. She sees three tailwinds that are expected to continue to fuel demand into the summer and beyond.

“One is the accelerated pace of vaccinations. Particularly in countries like the US and UK, we are really seeing vaccine deployments exceeding our expectations. Second, we continue to see strong stimulus spending from governments to encourage consumer activity and consumers. expenses, “the mayor told CNBC’s” Trading Nation “Thursday.

The third reason? The mayor says this is basic human behavior.

“We are all really sick and tired of being quarantined and having our movements restricted. You see the trivia [and] very specific data points that indicate that, ”she said, pointing to TSA crossings at US airports and miles driven on interstate highways at pandemic levels.

High expectations for oil demand may justify the recent price hike. West Texas Intermediate crude, for example, is trading at one-month highs and has risen 30% this year. WTI traded above $ 63 a barrel on Friday.

Still, short-term worries could tip the balance and push prices down, the mayor said.

“The biggest risk is how quickly OPEC + will bring back that supply, and then how quickly Iranian barrels potentially enter the market. And let’s remember that there are still around 7 million barrels a day of ‘supplies that are intentionally left out of the market, “she said.

OPEC + said it reintroduce 2 million barrels per day back in supplies over a three-month period, a gradual move to meet demand, but that could change his position if US shale producers start to get “too euphoric” and increase their own production, he said. declared the mayor. OPEC + is due to meet on April 28.

“I foresee that these barrels could potentially flood the market and ruin this nice balance we are in right now, because $ 60 WTI, $ 65 Brent is a very good position for the industry to get everyone back to profitability,” she declared.

Energy stocks surged on the rise in oil prices. The XLE energy ETF has risen almost 30% this year, by far the best performing S&P 500.

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Felix J. Dixon