Supply Still Outweights Demand in Oil Market
February 12, 2021
The International Energy Agency said global oil supply still outstrips demand due to persistent COVID-19 lockdowns and the spread of variants, but vaccines should help demand recover and soon enable producer to produce more. It said the rebound in oil demand has been delayed by a slow rollout of coronavirus vaccines in Europe. The IEA kept its outlook for oil demand growth in 2021 largely steady, saying a decline in the first quarter of this year from already low levels in the last quarter of 2020 would soon reverse. It said, “the forecast for economic and oil demand growth are highly dependent on progress in distributing and administering vaccines, and the easing of travel restriction in the world’s major economies.”
In its latest monthly report OPEC sees 2021 world oil demand increasing by 5.7 million barrels per day, down from a previous estimate of 5.9 million bpd to 96.1 million bpd. It said the economy is showing signs of a healthy recovery in 2021, however oil demand is currently lagging. It said oil demand is forecast to increase in the second half of 2021.
Citi forecast that Brent crude oil will likely reach $70 per barrel by the end of the year. It said physical markets have been reflecting tighter fundamentals, with strengthening backwardation, which further encourages financial flows to crude oil.
Royal Dutch Shell said its oil production peaked in 2019 and is expected to decline by 1% to 2% annually.
PBF Energy Inc Chief Executive Officer, Tom Nimble, said that although there are some signs of improvement, “we expect demand to remain depressed until vaccine distribution is improved, so that everyone can return to their normal routines.
The director of the COVID19 Genomics UK consortium stated that the coronavirus variant first found in the British region of Kent is likely to sweep around the world and the battle with the virus is gong to go on for at least a decade in her opinion. This news added downside pressure to prices during yesterday’s trading.
The Energy Information Administration reported yesterday that the US will return to being a net petroleum importer in 2021.