Global oil demand is set to return to pre-pandemic levels by the end of 2022, rising 5.4 mb/d in 2021 and a further 3.1 mb/d next year, IEA said in its monthly Oil Report for June 2021.
According to the report issued last week, the world oil supply is expected to grow at a faster rate in 2022, with the US driving gains of 1.6 mb/d from producers outside the OPEC+ alliance.
That leaves room for OPEC+ to boost crude oil production by 1.4 mb/d above its July 2021-March 2022 target to meet demand growth,
In 2021, oil output from non-OPEC+ is set to rise 710 kb/d, while total oil supply from OPEC+ could increase by 800 kb/d if the bloc sticks with its existing policy, the report finds.
Meeting the expected demand growth is unlikely to be a problem.
Even after boosting oil production by around 2 mb/d over the May-July period, OPEC+ will have 6.9 mb/d of effective spare capacity. If sanctions on Iran are lifted, an additional 1.4 mb/d could be brought to market in relatively short order.
As for those producers outside the alliance, output growth is set to accelerate from 700 kb/d in 2021 to 1.6 mb/d next year. The US leads 2022 gains, adding more than 900 kb/d to total supply, followed by Canada, Brazil and Norway. That leaves non-OPEC+ output well above 2019 levels. By contrast, even if OPEC+ producers were to fill the gap created by demand growth, the bloc’s output would still be more than 2 mb/d below the 2019 average.
Meanwhile, global refinery throughput in 2021 is expected to recover half of the 7.4 mb/d fall in 2020, lagging behind demand growth for refined products as surplus inventories are drawn down.
In 2022, refining activity is forecast to increase by 2.4 mb/d. 3.8 mb/d of new capacity coming on line over 2021-22 will be partially offset by 2.3 mb/d of announced closures or conversions to bio-refineries.
OECD industry stocks held relatively steady in April, at 2,926 mb, but fell 1.6 mb below the pre-Covid 2015-19 average for the first time in more than a year. May preliminary data for the US, Europe and Japan show that industry stocks rose by a combined 17.2 mb. Crude oil held in short-term floating storage declined by 6.8 mb to 99.4 mb in May, its lowest since February 2020.
Crude prices rose on bullish oil fundamentals and financial markets over the past month, while backwardation steepened on both benchmark crude futures contracts reflecting anticipation of tighter markets ahead. North Sea Dated rose $3.95/bbl in May to $68.54/bbl and reached $69.84/bbl in the first week of June. Tanker freight costs remained weak overall during May.
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