The rebounding global economy – led by China and the US – has seen the International Energy Agency (IEA) lift its 2021 demand forecast.
Stronger economic forecasts and “robust” indicators of growing demand for a long list of products and services (especially key commodities) will see 2020 global oil demand grow 230,000 barrels a day (b/d) faster than previously forecast, the IEA said in its April oil market report published Wednesday.
But despite this strengthening recovery, the IEA warned that there’s a continuing downside risk for oil prices for a couple of reasons – the most important the continuing presence of rising Covid infections infections in Asia, the US and Europe.
Supported by the rapid vaccine rollout and a massive economic stimulus package, the IEA has revised up its US oil demand forecast for the second half of the year by around 365,000 b/d. Its Chinese oil consumption forecast for 2021 was also raised by 160,000 b/d.
World oil demand is now expected to rise by 5.7 million b/d in 2021 to 96.7 million b/d, following 2020’s collapse of 8.7 million b/d. While bullish, that will still be more than 5 million barrels a day under the 101 million barrels a day in 2019.
“Oil markets fundamentals look decidedly stronger,” the IEA said. “ he massive overhang in global oil inventories that built up during last year’s COVID-19 demand shock is being worked off, vaccine campaigns are gathering pace and the global economy appears to be on a better footing.”
The IEA said OECD industry stocks fell for the seventh consecutive month in February, down 55.8 million barrels, or 2 million b/d, led by a sharp drop in product inventories.
Hours after the IEA’s report was published, America’s Energy Information Administration (EIA) released its weekly stocks report which showed a surprised 5.9 million barrel fall instead of the forecast 2.9 million barrel drop. That took total stocks to 492 million barrels – still a touch above the five-year average but much better than forecast.
Oil stocks are now at record lows on the US East Coast as demand for petrol rises faster than expected.
US petrol supply is now 0.2% in the past four weeks is now above the four-week average a year ago but jet fuel supply is still 20% lower, even though supply in the past week was nearly 25% above what it was a year ago.
On Tuesday, OPEC revised higher its forecast for world oil demand this year, now expecting it to rise by 5.95 million bpd, up by 70,000 bpd from its forecast last month.
OPEC is set to ease production cuts adding 350,000 bpd of crude output in May, another 350,000 bpd in June and 441,000 bpd in July.
All this bullish news was manna for oil bulls who chased prices higher by nearly 5% for the day on Wednesday.
Brent crude futures rose $US2.91, or 4.6%, to settle at $US66.58 a barrel while West Texas Intermediate (WTI) crude ended $US2.97, or 4.9%, higher at $US63.15 a barrel.