The supply of oil stocks may decline, but despite this, the world’s major producers will not yet be able to ease their grip on production, as the recovery witnessed this year will be less than two-thirds of the lost demand in 2020, and the need for production restrictions will remain for many months.
The three major oil agencies in the world (the International Energy Agency, the US Energy Information Administration, and the Organization of Petroleum Exporting Countries) are close to a consensus that the global growth in oil demand on an annual basis in 2021 may reach 5.5 million barrels per day, close to the levels expected. When the International Energy Agency began publishing detailed forecasts for this year last July.
At the time, its outlook was pessimistic, expecting growth of 1.5 million barrels per day less than its peers, but the Energy Information Administration and OPEC have repeatedly reduced their forecasts since.
Demand rose below expectations
Despite the boost given to demand in the winter due to cold weather across most of the Northern Hemisphere and the acceleration of economic activity with the distribution of vaccines, previous expectations of strong growth in demand in the first quarter were dispelled.
Currently, all three agencies believe that global oil demand in the current quarter will not change much from the same period directly last year before the epidemic actually hits oil consumption.
Unsurprisingly, demand is expected to show strong growth on an annual basis in the second quarter, but despite the increase in demand by about 12 million barrels per day, the recovery will still be equivalent to only about three-quarters of the lost demand in the same period last year, and the three agencies see 60% restored. To 65% of last year’s losses, and the range widens to between 60% and 75% in the fourth quarter.
Supply expectations varied
On the supply side, the agencies are moving in different directions. While the International Energy Agency and the Energy Information Administration lowered production expectations from outside OPEC in the first quarter by more than 500 thousand barrels per day due to the impact of the winter storm, “Uri” on US production, OPEC raised its estimates by 230 A thousand barrels.
However, looking at the entirety of 2021, the IEA forecast is not in line with its two peers, and it is the only one of the three that does not see a response from the US shale oil sector to the oil price increases that pushed WTI above $ 60 a barrel until the end of the year.
The Energy Information Administration raised its expectations for non-OPEC supply in the second half of 2021 by 500 thousand barrels per day, while OPEC strengthened its expectations by more, and both believe that producers in the US shale oil sector will respond to the high prices with more investment and production.
The International Energy Agency is the only one that expects an increase in the world’s need for OPEC crude this year, at 27.32 million barrels per day, currently, an increase of 210,000 barrels per day over last month’s expectations.
In contrast, the Energy Information Administration lowered its estimate of the amount of crude that OPEC should pump to balance supply and demand by 310 thousand barrels per day to 27.23 million barrels, while OPEC lowered its expectations by 25 thousand barrels per day to 27.26 million barrels.