A stronger global economy will accelerate growth in oil demand to 5.5 million barrels per day (GDP), according to the US Energy Information Administration (EIA) said in its short-term energy outlook for April this week, increasing its demand forecast growth by 200,000 bpd.
Global economic growth is now expected at 6.2 percent in 2021, up 0.4 percentage point from the STEO in March, according to estimates from Oxford Economics, which uses the EIA for forecast modeling.
Next year, global oil demand will increase by another 3.7 million bpd by 2021, exceeding the 2019 pre-pandemic levels. World petroleum consumption is averaging 101.3 million bpd in 2022, according to the latest estimates from the EIA.
Global oil demand growth in 2021 was lifted by 200,000 bpd, while the 2022 estimate of 100,000 bpd from the March forecasts, which linked demand growth of 5.3 million bpd this year and 3.8 million bpd in 2022.
The EIA has slightly more conservative estimates of global oil demand growth than OPEC. The latest upward revision of the US government still places this year’s demand growth below OPEC’s estimate, which it did. 5.9 million bpd in its monthly oil market report. OPEC’s monthly report for April comes next Tuesday, April 13th. In the March report, OPEC increased its outlook for the second half of 2021. Nevertheless, he revised his estimates for the demand for oil for the first half of 2021 due to extensive closures in major economies in Europe and high unemployment rates in the United States slowing the recovery.
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Last week, the OPEC + Joint Technical Committee (JTC) apparently revised the estimate of demand growth up to 5.6 million bpd for 2021.
OPEC + however trust indicated demand jumped back later this year by deciding to produce around 2 million bpd by July by easing production cuts by more than 1 million and Saudi Arabia gradually reversed its extra 1 million bpd cut.
The key question for the oil market and all forecasters now is whether the expectations of strong growth in oil demand will materialize in the second half of the year. The most important wildcard, of course, is the pandemic and the ability of large economies to exit lockouts and other constraints with strong economic growth. Signs from the United States and China indicate strong growth. The easy monetary policy in many countries also continues to support economic activity and, as an extension, the growth in demand for oil. Advances in vaccination programs will enable more people to start traveling more, including on international airline routes, which will not only spur economies but also the demand for jet fuel that has hit the pandemic.
Despite uncertainty about the pace of recovery, most analysts still expect strong economic growth during the second half of 2021, which in turn will increase demand for oil.
The EIA expects global oil markets to be ‘much more balanced’ in the second half of 2021.
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‘Forecast increases in global oil inventories will contribute to a mostly balanced market during the second half of 2021. However, the forecast strongly depends on future production decisions by OPEC +, the reaction of US oil production to oil prices and the rate of oil demand growth, below others, ”the EIA said in the STEO of April.
US shale will respond to higher oil prices by increasing production between the second quarter and the fourth quarter of 2021, according to EIA estimates. However, the averages for 2021 and 2022 for total U.S. crude oil production were lowered by 100,000 bpd and 160,000 bpd, respectively, from the March forecasts.
US oil production is set to average 11.04 million bpd this year, the latest projections show, off the 11.1 million bpd estimate from last month. Production in 2022 will average 11.9 million bpd, according to the April estimate, of 12.0 million bpd expected in March. Last month, however, the EIA already increased its estimate of 2022 by as much as 500,000 bpd due to higher expected oil prices.
Due to the expectation that WTI crude prices will remain above $ 55 per barrel, US oil production will rise in the fourth quarter from an average of 10.9 million bpd in the second quarter to almost 11.4 million bpd in the fourth quarter. In the fourth quarter of next year, US oil production is expected to average more than 12 million bpd – at 12.18 million bpd.
Despite the spending discipline of major US producers, higher oil prices will put the shale spot back on a growth path, even if growth is slower than what we saw before the pandemic.
By Tsvetana Paraskova for Oilprice.com
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