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- OPEC sees tight oil market through end-2021, solid demand growth for 2022
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Apr 3
OPEC continues to project robust oil demand growth in the second half of 2021, providing the producer bloc and its allies a reason to boost supplies as the world recovers from the pandemic.
OPEC’s analysts have kept its forecast of 2021 oil demand at 96.58 million b/d, up 5.95 million b/d from 2020, in the organization’s closely watched monthly oil market report released July 15. And in its first forecast for 2022, OPEC sees demand continuing to rise by another 3.28 million b/d to 99.86 million b/d for the year, with the 100 million b/d mark exceeded in H2.
The data comes as OPEC, Russia and several other allies are still trying to clinch a deal to collectively raise production by 400,000 b/d each month through the end of the year and possibly into 2022. A dispute between Saudi Arabia and the UAE over the latter’s output target has been a major stumbling block, though there were indications this week that the two sides could be nearing an agreement.
“Solid expectations exist for global economic growth in 2022,” OPEC stated. “These include improved containment of COVID-19, particularly in emerging and developing countries, which are forecast to spur oil demand to reach pre-pandemic levels in 2022.”
For 2022, gasoline and diesel are expected to lead oil demand growth, according to OPEC, while jet fuel recovers as business travel is expected to lag a pick up in domestic and international air travel. Light distillates will be supported by capacity additions, including NGL plants in the US, propane dehydrogenation plants in China and “steady” petrochemical margins, it said.
With non-OPEC supply forecast to grow more slowly than demand, OPEC will have an opportunity to boost its market share as demand for its crude will climb 1.1 million b/d to pre-pandemic levels of 28.7 million b/d next year, the analysis showed. The call on OPEC’s crude in Q1 2022 will be 26.4 million b/d, which is just about 400,000 b/d higher than the June output, according to the report. Assuming OPEC’s share of the eased cuts will be 325,000 b/d through this year, that would put its production above the call by Q1 2022.
The 23-country OPEC+ coalition is currently withholding 5.8 million b/d of crude production, and analysts largely agree some of that volume is badly needed to prevent a supply squeeze that could cause prices to shoot further upwards later this summer.
Dated Brent prices have eased back since hitting their highest since October 2018 earlier this month, but are still up more than 50% since the start of the year, reflecting the world’s continuing emergence from the pandemic.
The International Energy Agency, which issued its latest forecasts July 14, is less bullish, seeing 2021 oil demand at 96.4 million b/d and 2022 demand at 99.5 million b/d.
Organization for Economic Cooperation and Development oil stocks were 21.7 million barrels below the 2015-2019 average that OPEC+ has said it is targeting, according to OPEC’s report.
On the supply side, OPEC expects 63.76 million b/d of non-OPEC supply in 2021, up 30,000 b/d from its estimate last month. For 2022, non-OPEC supply will grow 2.1 million b/d, it said.
The figures result in the call on OPEC crude coming in at 27.65 million b/d for 2021 and 28.7 million b/d for 2022. That 2022 figure surpasses the March 2020 pre-pandemic call on OPEC crude.
OPEC’s 13 members pumped 26.03 million b/d in June, according to an average of secondary sources used by the secretariat to monitor member production.
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