The Strategist

IEA: Oil approaching a deficit

05/13/2021 - 03:33

Oil demand in 2021 will increase to 96.4 million barrels per day (bpd), which is 5.4 million bpd more than in 2020, the previous growth estimate was reduced by 270 thousand bpd, according to the International Energy Agency report.

Jonathan Cutrer via flickr
Jonathan Cutrer via flickr
The adjustments take into account changes in demand in the first quarter - it was 320 kbpd lower in Europe and 515 kbpd lower in North America - and expectations of a decline in consumption in India in the second quarter (minus 630 tpd). OPEC had provided an estimate the day before, maintaining its annual global demand growth forecast (plus 6m bpd by 2020) but lowering it by 0.3m bpd for the second quarter and raising it by 0.15m and 0.29m bpd for the third and fourth quarters, respectively.

Oil supply, on the other hand, rose by 330k bpd to 93.4m bpd in April (6.7m bpd lower than a year ago). OPEC+ agreement provides for gradual production growth: in total 3.8m bpd from April to December (including 2m bpd by June, two thirds to come from Saudi Arabia). The IEA expects a year-on-year increase in production of 1.4m bpd against a decline of 6.6m bpd in 2020 (consumption then fell by 8.7m bpd), the forecast unchanged. OPEC countries, meanwhile, are set to add 820kbpd, compared with a decline of 5.3m bpd in 2020 and other countries will add 620kbpd after a decline of 1.3m bpd (the US will see a decline of 160kbpd after a fall of 600kbpd in 2020).

The gap between production and potential demand for OPEC crude will widen to 2.5m bpd by the fourth quarter compared with 150k bpd in the second quarter. In April, OPEC countries fulfilled the deal by 126% and all OPEC+ members by 101%. 

"Oil stocks, after last year's surplus, are approaching normal levels," the IEA notes. Stocks will continue to decline - even if the deal is relaxed, supply will not keep up with rising demand. However, until the end of the pandemic, the outlook for oil consumption will be largely uncertain, the agency believes.