IEA upbeat on 2H oil demand on Covid recovery hopes

The IEA has cut its global oil demand growth forecast for 2021, but kept it little changed for the second half on the assumption that the Covid-19 situation in India improves and globally the pandemic largely comes under control through vaccination campaigns.

"India's Covid crisis is a reminder that the outlook for oil demand is mired in uncertainty," the IEA said in its latest Oil Market Report (OMR).

The Paris-based energy watchdog now expects full-year global oil consumption growth of 5.4mn b/d, to 96.4mn b/d, lower by 270,000 b/d from its previous forecast largely because of downgrades to demand in the first half of the year.

It revised demand lower in Europe and OECD Americas by 320,000 b/d and 515,000 b/d respectively in the first quarter, and cut its forecast for demand in India in the second quarter by 630,000 b/d. But it expects demand to jump to 99.6mn b/d in the last three months of 2021, compared with 93.1mn b/d in the first quarter, as vaccination rates rise and mobility restrictions ease.

The IEA said that based on the current Opec+ agreement, it sees global oil production growing by 3.8mn b/d from April to December.

"For 2021 as a whole, world oil production expands by 1.4mn b/d year-on-year versus a collapse of 6.6mn b/d in 2020," it said. "Canada leads non-Opec+ with growth of 340,000 b/d while the US is set to contract by a further 160,000 b/d."

The IEA said that OECD industry oil inventories drew by 25mn bl in March, reducing the overhang versus the latest five-year average to 1.7mn bl, and that stocks continued to fall in April. Global stocks were 36.9mn bl above the 2015-19 average, which the Opec+ group uses to benchmark the success of its production agreement.

"After nearly a year of robust supply restraint from Opec+, bloated world oil inventories that built up during last year's Covid-19 demand shock have returned to more normal levels," it said. "While the market looks oversupplied in May, stock draws are set to resume from June, even with global oil supply on the rise."

By Konstantin Rozhnov