Crude demand gains strength, pandemic still downside risk – IEA

Jonathan Lopez

14-Apr-2021

LONDON (ICIS)–Global oil demand is gaining strength as vaccine campaigns in rich countries gather pace and as major US stimulus policies are likely to pass, the International Energy Agency (IEA) said on Wednesday.

One year on from what the IEA dubbed as the ‘Black April’ when the global economy came to a halt as lockdowns crimped movement of around 4bn people, fundamentals “look decidedly” stronger in April 2021.

But a two-tier way forward could be emerging, with developed nations vaccination campaigns now in full swing while emerging economies are slower. In some cases, like India or Brazil, face a resurgence of the pandemic.

In Europe, while vaccinations are speeding up, several countries are also registering an uptick in Covid-19 cases, apart from the UK where the vaccine roll-out has been quicker.

An indicator that the recovery may be slowing was crude oil stock levels held by countries within the OECD group of 37 advanced economies, which stayed flat in March following months of falls that had contributed to work off the “massive overhang” in global inventories since the first wave of the pandemic hit.

But brighter economic indicators for some developed economies prompted the IEA to upgrade its forecast for crude demand growth in 2021, up by 230,000 bbl/day compared to the previous Oil Market Report estimate published March; on average, it expects demand to stand at 96.7m bbl/day for the year.

The crude producing cartel OPEC said this week it expects demand at 96.5m bbl/day in 2021.

“There are still lingering concerns over the strength of the recovery in demand growth, however, with the number of Covid-19 cases surging in Europe and some major oil consuming countries such as India and Brazil,” said IEA.

From their lows of last year, crude oil prices have stabilised around the $60s/bbl mark. As the recovery gains pace, oil production follows suit, bringing more barrels into the market and potentially increasing stocks.

“Prices could yet come under renewed pressure in the coming months with world oil supply set to ramp up and shift the market from deficit towards balance. Global production was already on the rise in March, increasing by 1.7m bbl/day as US output recovered from a sharp drop in February and OPEC+ supply edged higher.”

Adding to the US output increase, the OPEC+ group led by Saudi Arabia and non-OPEC countries including Russia, could also decide to ease their output cuts in place, potentially bringing in 2m bbl/day to the market from May to July.

“The market changes dramatically in the latter half of this year as nearly 2m bbl/day of extra supply may be required to meet expected demand growth – even after factoring in the announced ramp-up of OPEC+ production,” said IEA.

READ MORE

Global News + ICIS Chemical Business (ICB)

See the full picture, with unlimited access to ICIS chemicals news across all markets and regions, plus ICB, the industry-leading magazine for the chemicals industry.

Contact us

Now, more than ever, dynamic insights are key to navigating complex, volatile commodity markets. Access to expert insights on the latest industry developments and tracking market changes are vital in making sustainable business decisions.

Want to learn about how we can work together to bring you actionable insight and support your business decisions?

Need Help?

Need Help?