IEA: Oil demand greater than supplies
The International Energy Agency (IEA) said May 12 it expected global economic expansion will require more oil than current production scenarios support.
Under the current production scenario embraced by OPEC and its allies, the IEA said that supplies will not keep up with the expected demand recovery this year.
Saudi Arabia and Russia lead a collective group that includes 10 non-member states in the OPEC+ alliance. Ministers during a virtual meeting in April opted to gradually relax production restraints, adding 350,000 b/d to the market in both May and June and 400,000 b/d in July.
“The widening supply and demand gap paves the way for a further easing of OPEC+ supply cuts or even sharper stock draws,” the IEA’s monthly market report read. “The group is set to meet again on June 1 to review policy.”
By then, the IEA expects some progress in negotiations with Iran, which wants full sanctions relief from the US government before scaling back its nuclear ambitions. Sanctions relief could upend OPEC+ efforts to balance the market, however, as more Iranian oil would be released.
With that in mind, the IEA said the COVID-19 crisis in India adds a level of uncertainty to any future predictions.
“Weaker-than-expected 1Q21 oil use in the United States and Europe and a reduced outlook for India due to the recent surge in Covid-19 led us to revise down 2021 demand growth to 5.4mn b/d,” the monthly report read. “The forecast for the second half of the year is largely unchanged, however, on the assumption that the situation in India and elsewhere improves.”
In its monthly market report, released May 11, economists at the Organisation of the Petroleum Exporting Countries said they expected the world economy will take in an average of 96.5mn b/d of crude oil, a 6mn b/d increase from last year, but unchanged from the April market report.
For OPEC, demand concerns in COVID-stricken India and Brazil are offset by the acceleration of vaccinations elsewhere in the world.