A stronger global economy will accelerate oil demand growth to 5.5 million barrels per day (bpd) this year, US Energy Information Administration (EIA) said in its Short-Term Energy Outlook for April this week, boosting projected demand growth by 200,000 bpd.
Global economic growth is now expected to reach 6.2 percent by 2021, up 0.4 percentage points from March’s STEO, according to estimates from Oxford Economics, which uses the EIA for prediction modeling.
Next year, global oil demand will increase by an additional 3.7 million bpd by 2021, surpassing the pre-pandemic levels of 2019. World oil consumption will average 101.3 million bpd by 2022, according to the latest EIA estimates.
Global oil demand growth in 2021 was increased by 200,000 bpd, while the 2022 growth forecast was revised downward by 100,000 bpd from Forecasts for March which had linked demand growth to 5.3 million barrels per day this year and 3.8 million barrels per day in 2022.
The EIA has slightly more conservative estimates of global oil demand growth than OPEC. The latest upward revision by the US government still puts demand growth this year below OPEC’s estimate, which had risen 5.9 million bpd in its March Monthly Oil Market Report. The monthly OPEC report for April will be released next Tuesday, April 13. In the March report, OPEC raised its outlook for the second half of 2021. Still, it has downgraded its oil demand forecasts for the first half of 2021 due to protracted lockdowns in major economies in Europe and high unemployment rates in the United States slowing the recovery.
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Last week, the OPEC + Joint Technical Committee (JTC) reportedly downgraded its estimate of demand growth up to 5.6 million bpd before 2021.
OPEC + be confident Demand rebounded sharply later this year with the decision to pay back about 2 million barrels per day by July by easing production cuts by more than 1 million and gradually reversing Saudi Arabia its additional cut of 1 million barrels per day .
The key question for the oil market and all forecasters now is whether expectations of robust oil demand growth in the second half of the year will materialize. The main wildcard is of course the pandemic and the ability of major economies to break through lockdowns and other constraints with strong economic growth. Signs from the United States and China point to robust growth. The lenient monetary policy pursued in many will also support economic activity and, by extension, growth in oil demand. Advances in vaccination programs would allow more people to travel more, including on international flight routes, boosting not only the economy but also the demand for jet fuel, which has been badly affected by the pandemic.
Despite ongoing uncertainties about the pace of the recovery, most analysts continue to expect strong economic growth in the second half of 2021, which will in turn boost oil demand.
The EIA expects global oil markets to “become much more balanced” in the second half of 2021.
Related: OPEC + was wise to cut output cuts despite demand concerns
“ Expected increases in global oil supply will contribute to a broadly balanced market in the second half of 2021. However, the forecast depends heavily on future OPEC + production decisions, the responsiveness of tight US oil production to oil prices and the pace of oil prices. demand growth, among other factors, ”the EIA said in April’s STEO.
US shale will respond to higher oil prices by increasing production between the second quarter and the fourth quarter of 2021, EIA estimates show. However, the 2021 and 2022 averages for total crude oil production in the US were cut by about 100,000 bpd and 160,000 bpd, respectively, from the March forecast.
American oil production is on the rise on average 11.04 million bpd this year, the latest projections show, lower than the 11.1 million bpd estimate from last month. Production in 2022 will average 11.9 million barrels per day, according to the April estimate, down from the projected 12.0 million barrels per day in March. Last month, however, the EIA had already raised its estimate for 2022 by as much as 500,000 bpd due to higher projected oil prices.
With WTI Crude prices expected to remain above $ 55 a barrel this year, US oil production will increase from an average of 10.9 million bpd in the second quarter to nearly 11.4 million bpd in the fourth quarter this year. according to the EIA. In the fourth quarter of next year, US oil production is expected to average more than 12 million barrels per day – 12.18 million barrels per day.
Despite the spending discipline of major US producers, higher oil prices will put the shale patch back on a growth trajectory, even if it is slower than what we saw before the pandemic.
By Tsvetana Paraskova for Oilprice.com
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