The rebound in global oil demand is set to accelerate in the second half of 2021 as the world continues to burn through the supply glut it accrued last year, the Organization of the Petroleum Exporting Countries said Thursday.
In its monthly market report, OPEC highlighted data showing that the crude inventories of the world’s developed countries had slipped to around 34 million barrels above the average level for 2015-19.
The Vienna-based organization’s technical committee has said in recent weeks that it expects the world’s crude stocks to fall below the five-year average in the second half of the year. OPEC’s report on Thursday confirmed its expectations that vaccination rollouts, stimulus measures and pent-up demand will add momentum to a resurgence in oil demand.
That outlook recently prompted the cartel to continue relaxing curbs on oil production put in place last year when the world was close to running out of places to store excess crude when pandemic restrictions hammered demand.
Rising consumption of transportation fuels like gasoline mean oil demand will increase to 99 million barrels a day in the second half of 2021, a 5% increase on its level in the first six months of the year, OPEC said. Demand in the fourth quarter is expected to be 99.82 million barrels a day, just 150,000 barrels below 2019’s pre-pandemic average.
Oil prices edged higher on Thursday, with Brent crude, the global benchmark, adding 0.4% to $72.52 a barrel. West Texas Intermediate futures, the U.S. gauge, closed up 0.5% at $70.29 a barrel. Both benchmarks have repeatedly broken multiyear highs in recent weeks, with the world’s dwindling supply glut and rising demand.
In its report, OPEC left unchanged its forecast that global oil demand will rebound by six million barrels a day in 2021 and held its estimate that global economic growth will rise 5.5% this year.
But the cartel did change its expectations for supply growth from its non-OPEC counterparts, upping its forecast by 100,000 barrels a day to 800,000 barrels a day. Driving that increase is a faster-than-expected recovery in U.S. production, with output also rising in other non-cartel producers like Norway, China and Indonesia.
With crude consumption continuing to rise toward the middle of the year, “investment is anticipated to rise, with the stabilization of crude oil markets expected to add further upside in some producer countries, including the U.S.,” the report said.
Aside from the forecast uptick in U.S. production, investors have in recent weeks highlighted new coronavirus variants and the potential end to sanctions on Iranian oil supply as threats to the oil market’s recent resurgence.
Iranian oil supply rose again in May, climbing 42,000 barrels a day to just under 2.5 million barrels a day, according to secondary data cited by OPEC. Analysts expect Iran to be able to add as much as 1.5 million extra barrels a day to global markets if talks between Tehran and world powers successfully revive a nuclear deal that would allow Iran to pump at will.
Write to David Hodari at [email protected]
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Appeared in the June 11, 2021, print edition as ‘Rebound in Oil Demand Expected to Pick Up.’