A glut in global oil markets is being worked off as the world economy begins to recover from the COVID-19 pandemic, and as OPEC and its allies restrain production, the International Energy Agency (IEA) said yesterday.
The agency raised its expectations for the recovery in oil demand after the IMF increased its forecasts for global growth this year.
“This improved outlook, along with stronger prompt indicators, has led us to revise up our 2021 global oil demand growth forecast,” it said.
Photo: Reuters
The agency expects that global oil demand would rise by 5.7 million barrels per day to 96.7 barrels, following last year’s drop of 8.7 barrels per day.
OPEC on Tuesday also raised its demand forecast for this year to 96.5 barrels per day.
Oil demand was hammered last year as many countries shut down swathes of their economies to slow the spread of COVID-19.
That caused a glut in supplies, but the OPEC+ group, which also includes heavyweight producer Russia, sharply cut output last year to reduce that and counter the plunge in prices, with some briefly turning negative as storage ran short.
That glut appears to have been largely worked off.
The IEA said that preliminary data suggest that OECD oil stocks last month held largely steady, following seven consecutive months of draws, and were heading close to their five-year average.
OPEC+ has been slowly increasing output since the beginning of this year and early this month signaled that it would lift output by more than 2 barrels per day in the coming three months in the face of an expected rise in demand.
While the first quarter was disappointing as many European and several major emerging economies registered a resurgence of the pandemic, global growth is expected to pick up as COVID-19 vaccination campaigns begin to have an impact.
The agency sees the global oil market changing “dramatically in the latter half of this year as nearly 2 barrels per day of extra supply may be required to meet expected demand growth.”
However, with OPEC+ still having plenty of additional production capacity that it can bring back on line, it does not see a supply crunch developing.
“The bloc’s monthly calibration of supply may give it the flexibility to meet incremental demand by ramping up swiftly or adjusting output lower should the demand recovery fail to keep pace,” the agency said.
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