Global oil demand to hit 6 mb/d

Organisation of Petroleum Exporting Countries (OPEC) estimates that world oil demand for 2021 is expected to increase by 6.0 million barrel per day.

In its Monthly Oil Market Report (MOMR) stated that its projection was revised upward due to positive mobility indicators for OECD countries in third quarter of 2021 was offset by a downward revision to Q4 2021, given the risk to oil demand fundamentals stemming from the increase in COVID-19 cases, primarily related to the Delta variant. World oil demand is estimated at 96.7 mb/d in 2021.

In 2022, world oil demand is forecast to rise by 4.2 mb/d y-o-y, revised higher by around 0.9 mb/d compared to last month’s report, as the pace of recovery in oil demand is now assumed to be stronger and mostly taking place in 2022.

As vaccination rates rise, the COVID-19 pandemic is expected to be better managed and economic activities and mobility will firmly return to pre-COVID-19 levels. The revisions are based in both the OECD and non-OECD regions, with steady economic developments expected to support the partially delayed recovery in oil demand in various sectors.

As a result, the OECD oil demand outlook was revised upward by 0.3 mb/d in 2022 compared to last month’s projection and is projected to increase by 1.8 mb/d y-o-y. In the non-OECD region, oil demand in 2022 is estimated to increase by 2.3 mb/d y-o-y, revised higher by around 0.6 mb/d compared to last month’s estimations, supported by steady economic activities in the main economies, particularly China, India and Other Asia.

Additionally, ongoing improvements in vaccination rates and a potential increase in public confidence in managing COVID-19 is anticipated to be more widespread in 2022, further supporting the recovery of oil demand, particularly transportation fuels. World oil demand is estimated at 100.8 mb/d in 2022, exceeding pre-pandemic levels.

World oil supply

The MOMR stated that Non-OPEC liquids supply growth in 2021 (including processing gains) was revised down by 0.17 mb/d from the previous assessment, owing to a downward revision of 0.52 mb/d in Q3 2021.

The revisions are mainly due to oil production outages in North America in August, related to Hurricane Ida in the Gulf of Mexico (GoM) and an explosion and fire on an offshore platform in Mexico. Production estimates in the North Sea were also revised down, due to lower-than-expected output in 3Q21. Annual growth is now forecast at 0.9 mb/d y-o-y, to reach 63.8 mb/d.

The US liquids supply forecast has been revised down by 41 tb/d and is forecast to grow by 0.08 mb/d y-o-y. The downward revision due to disruptions in production caused by Hurricane Ida was partially offset by higher-than-expected output in 2Q21. The 2021 oil supply forecast primarily sees growth in Canada, Russia, China, the US, Brazil and Norway, while output is projected to decline in the UK, Colombia, Indonesia and Egypt.

“The non-OPEC supply growth forecast for 2022 is unchanged at 2.9 mb/d, amid offsetting revisions, to average 66.8 mb/d (including a recovery of 0.11 mb/d in processing gains). Including the expected growth of OPEC NGLs, liquids supply is forecast to grow by 3.1 mb/d. The main drivers of liquids supply growth are Russia (1.0 mb/d) and the US (0.78 mb/d), followed by Brazil, Norway, Canada, Kazakhstan, Guyana and other non-OPEC countries in the Declaration of Cooperation (DoC). Nevertheless, uncertainty regarding the financial and operational aspects of US production remains high.

“OPEC NGLs and non-conventional liquids production in 2021 is estimated to grow by 0.12 mb/d to average 5.17 mb/d. For 2022, it is forecast to grow by 0.13 mb/d to average 5.29 mb/d. OPEC-13 crude oil production in August increased by 0.15 mb/d m-o-m to average 26.76 mb/d, according to secondary sources.

“Preliminary non-OPEC liquids production in August, including OPEC NGLs, is estimated to have declined by 0.2 mb/d m-o-m to average 68.9 mb/d, up by 2.36 mb/d y-o-y. As a result, preliminary data indicates that global oil supply increased by 0.03 mb/d m-o-m to average 95.69 mb/d, up by 4.93 mb/d y-o-y,” the oil cartel said.

Oil futures market

Crude oil futures prices on both sides of the Atlantic moved sharply lower during the first three weeks of August.

ICE Brent ticked down by $3.78, or 5.1%, on a monthly average, to settle at $70.51/b, while NYMEX WTI

dropped by $4.72, or 6.5%, to stand at $67.71/b, the report said.

“Downside pressure was witnessed on futures prices as the rapid spread of the COVID-19 Delta variant, along with renewed local lockdowns and tightening mobility restrictions, particularly in several Asian countries, including China, weighed on market sentiment and raised worries about the short-term oil demand outlook.

“This was in addition to signs of softening oil demand in major consuming countries, including China and Japan. ICE Brent and NYMEX WTI fell $11.15 and $11.63, respectively, or 14.6% and 15.7%, between late July and the end of the week to 20 August,” the report said.