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Home Business Energy

OPEC: Summer oil market outlook

4 years ago
in Energy, highlights, Home, home-news, latest News, Markets
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Global oil demand in 2021 is forecast to grow by around 6.0 mb/d y-o-y. The year started with new waves of COVID-19 infections, necessitating renewed lockdown measures in many OECD economies.

Therefore, the bulk of consumption growth is expected to take place in 2Q21 and 3Q21, with global demand y-o-y growth projected at 12.0 mb/d and 6.5 mb/d, respectively.

Gasoline is projected to be the key driver for oil demand recovery beginning with the onset of the summer driving season. Diesel will also provide support, mostly based on economic improvements stemming from the implementation of fiscal stimulus programmes.

As the spread and intensity of the COVID-19 pandemic are expected to subside with the ongoing rollout of vaccination programmes, social distancing requirements and travel limitations are likely to be scaled back, offering increased mobility in various parts of the world, especially in OECD regions.

In the US, data for 1Q21 showed that total gasoline consumption losses are smaller compared to previous months, implying that the impact of COVID-19 on gasoline demand is starting to fade, while data for jet fuel consumption remains far below normal levels.

Moreover, the easing of restrictions and increased demand expected in the traditional summer driving season should lift global gasoline requirements even further. Despite projections showing a marked improvement in gasoline demand compared to 2020, consumption in the summer months is still not expected to surpass 2019 levels due to COVID-19 related challenges.

Global gasoline demand is estimated at 24.0 mb/d in 1Q21, forecast at 25.6 mb/d in 2Q21, 26.7 mb/d in 3Q21 and 25.4 mb/d in 4Q21. On the other hand, diesel consumption is projected to be driven by positive developments supported by sizeable stimulus programmes in many economies, most notably the US.

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These programmes are expected to encourage growth in industry and infrastructure, particularly in Asian economies, including construction of buildings and roads along with increased demand for agricultural products. The demand for diesel is estimated at 26.3 mb/d in 1Q21 and projected at 26.6 mb/d in 2Q21, 27.4 mb/d in both 3Q21 and 4Q21 (Graph 1).

Nonetheless, diesel consumption is also expected to remain below pre-COVID-19 levels for the entire year.

On the refining side, the recent crude run cuts due to cold weather and maintenance have supported refining margins, mainly in the US, while remaining more or less sustained in Europe (Graph 2). Following refinery turnarounds scheduled for April, transport fuel demand, particularly gasoline and onroad diesel, is expected to rise steadily over the summer months, causing refinery intakes to show significant improvement and move closer to preCOVID-19 levels.

Nevertheless, refining capacity continues to exceed demand and is expected to exert pressure on margins going forward. With regard to global inventory levels, there have been sizeable drawdowns since the middle of 2020 and these are expected to continue in the coming months, mainly due to the successful efforts undertaken by the OPEC and non-OPEC countries participating in the Declaration of Cooperation (DoC) to voluntarily adjust production in response to the unprecedented demand contraction witnessed since 1Q20.

These reductions in surplus inventories as well as an expected pick up in product demand will pave the way for a cautious recovery of oil market balance in the summer months, supporting refining margins and throughputs.

Nevertheless, the large uncertainty surrounding the fragile recovery from the unprecedented impact of COVID-19 continues to require vigilant monitoring of market developments, despite the wide-ranging stimulus measures and early signs of a return to normalcy as progress continues on vaccination programmes in many major economies.

The joint efforts of the OPEC and non-OPEC countries participating in the DoC continue to contribute to market stability to ensure efficient, economic and secure supplies of oil to consumers, with a fair return on invested capital.

Source: OPEC
Via: norvanreports
Tags: Covid-19 infectionsGlobal oil demand in 2021OECDOPEC
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