There’s cautious optimism creeping into the outlook for the global oil market over the next six to 12 months.
The US Energy Information Agency sees global oil markets moving into balance in the December half year as rising output from OPEC and the US offset rising demand.
The EIA said in its June report on Tuesday that it sees more production in 2022 – a situation that could pressure prices.
“In the coming months, we expect that global oil production will increase to match rising levels of global oil consumption,” The EIA said in its report.” The rising oil production in the forecast is largely a result of the OPEC+ decision to raise its output.
“We expect rising production will end the persistent global oil inventory draws that have occurred for much of the past year and lead to relatively balanced global oil markets in the second half of 2021,” the agency noted.
” … However, in 2022, we expect that continuing growth in production from OPEC+ and accelerating growth in U.S. tight oil production-along with other supply growth-will outpace decelerating growth in global oil consumption and contribute to declining oil prices.
“Based on these factors, we expect Brent to average $60/b in 2022,” the EIA forecast.
Brent prices were above $US72 a barrel and the Agency sees Brent prices averaging $US$68 barrel in the third quarter.
The report expects OPEC production to average 26.9-million barrels per day (bpd) this year and 28.7-million bpd in 2022.
US production is forecast at an average 11.1-million bpd this year and jumping to 11.8-million bpd in 2022.
And looking at global demand the EIA sees it rising slowly, but still well short 2019 levels (ie pre-Covid).
“We estimate that 96.2 million b/d of petroleum and liquid fuels was consumed globally in May, an increase of 11.9 million b/d from May 2020 but 3.7 million b/d less than in May 2019.
“We forecast that global consumption of petroleum and liquid fuels will average 97.7 million b/d for all of 2021, which is a 5.4 million b/d increase from 2020,” the EIA forecast. Global production in 2019 tough was around 101 million barrels a day, so the short fall is still going to be there.
“We forecast that global consumption of petroleum and liquid fuels will increase by 3.6 million b/d in 2022 to average 101.3 million b/d.”
A major determinant for 2022 will be the level of Covid vaccination cover, especially in the developed economies and whether it is enough to allow border re-openings and the resumption of international travel. That will determine demand for jet fuel which remains weak.