IEA tweaks oil demand projections higher

The IEA has slightly increased its global oil demand growth projections after consumption rose by 1.1mn b/d year on year in the fourth quarter.

"We have raised our global demand estimates by 200,000 b/d for 2021 and 2022 — resulting in growth of 5.5mn b/d and 3.3 b/d, respectively — due to softer Covid restrictions," the Paris-based energy watchdog said in its latest Oil Market Report (OMR). In its December report, the IEA saw oil consumption growing by 5.4mn b/d in 2021 and by 3.3mn b/d in 2022.

Although it sees a seasonal demand decline in the current quarter, "exacerbated by more teleworking and less air travel", the IEA now sees global consumption reaching its pre-pandemic level of 99.7mn b/d in 2022.

Global oil supply rose by 130,000 b/d in December from November, to 98.6mn b/d, the watchdog said, and this has the potential to increase by 6.2mn b/d this year if Opec+ fully unwinds its cuts. Last year, global oil supply grew by 1.5mn b/d.

Most of this year's rise would come from Saudi Arabia, it said, although it also sees the US, Canada and Brazil producing "at their highest ever annual levels", with US oil output rising by 1mn b/d thanks to higher oil prices. It said Russia will be producing at maximum from May.

With Opec+ total oil supply scheduled to rise this year by 4.4mn b/d, the group's effective spare capacity will be just 2.6mn b/d in the second half of the year, "held primarily by Saudi Arabia and the UAE."

Total industry inventories in developed economies stood at 2.756bn bl in November, which was 354mn bl below a year earlier and the lowest in seven years, the IEA said. Preliminary data for December show OECD industry stocks falling by 45mn bl.

"Upward revisions to our demand estimates and a slightly lower outlook for world oil supply have tightened our balances for 2022, although they still show a first-quarter surplus," the IEA said. "If demand continues to grow strongly or supply disappoints, the low level of stocks and shrinking spare capacity mean that oil markets could be in for another volatile year in 2022."

By Konstantin Rozhnov