Global oil supply growth is forecast at 3 million barrels per day (b/d) in 2021 and 5.5 million b/d in 2022, according to S&P Global Platts Analytics.
Growth for 2021 was revised down (-0.2 million b/d) on lower US and OPEC estimates, Ash Singh, Manager Supply and Production Analytics, S&P Global Platts, said.
On June 1, OPEC+ had reaffirmed plans to increase quotas as decided on the last monthly meeting. “This was as expected. Big question is how OPEC+ will respond after July when quotas are planned to stay flat but call on OPEC+ supply rises strongly,” Singh noted.
US forecast was revised slightly down due to a deeper impact from the February freeze offs and slower than expected rig increases in recent weeks. Strong growth is still expected in 2H21 and 2022 despite the downward revision, according to Singh.
“We expect a framework agreement before the June 18 Iranian presidential elections, but with the clock ticking odds of post June18 deal is rising. Full sanctions relief could come by September in our base case and by Q1 2022 if there is delay. Any delays to the base case timeline will be further bullish signal to a market that needs significant supply growth to meet demand needs,” he stated.
According to Kang Wu, Head of Global Macro and Demand, S&P Global Platts, global oil demand in 2022 is forecast to grow significantly on increasingly optimistic economic data and forecasts in the US, Europe, and China, resulting in 2022 global oil demand growth to 4.5 million b/d over 2021, reaching 103 million b/d.
This means the 2022 demand will surpass 2019 levels by about 1 million b/d.
“Despite downward revisions in India and Japan, global oil demand is estimated to have grown by 1.4 million b/d in May over April,” said Wu.
“Upgraded outlook for Europe, resilience in the US, China and the Middle East continue to keep the month-on-month demand growth high at 6.9 million b/d over June-August. Key support is found from accelerating economic growth along with seasonal factors. For the year as a whole, global oil demand is expected to grow by 5.6 million b/d, which will be 3.5 million b/d below pre-COVID levels in 2019.”
Globally, newly confirmed coronavirus cases continue to fall as vaccine deployment continues.
There has been a recent uptick in cases in China, prompting restrictions in Guangzhou, which has notably reduced subway traffic. There are still elevated cases in many countries within Latin American such as Uruguay, Argentina, Colombia, Peru and Chile, along with Mideast countries such as Bahrain and Kuwait. There has also been a minor uptick in South Africa and UK.
Mutated variants are still a concern, but broadly speaking, things continue to improve, says Wu. Mobility and aviation trends are looking increasingly constructive. There continues to be bit of softness in Asian aviation which may help explain the softening in Asian jet fuel cracks.
The downdraft in India’s aviation and mobility is now reversing as coronavirus cases ease. There has been improvement in Brazil’s air traffic along with mobility, while Mexico’s mobility is the strongest among major Latin American countries. Europe and US continue to improve on both mobility and aviation.
Restaurant dining is normalizing with the UK leading, but significant variation across regions, the analyst explains.
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