The economic impact of the
Covid-19 Delta variant and rebounding output mean that
expectations of global oil demand outstripping supply are
fading, the IEA and OPEC said
Thursday.
In its closely watched
monthly market report, the International Energy Agency
said that the worsening of the
pandemic, as well as revisions
to historical data, mean its
global oil demand outlook has
been “appreciably downgraded,” with some of this
year’s forecast recovery
shifted to 2022.
Investors have become concerned about falling commodities demand in China, where
Beijing authorities last week
canceled all large-scale exhibitions and events for the remainder of August. That, and
other measures aimed at slowing the spread of the Delta
variant, has in recent days
spooked traders who were already worried about the fragile nature of China’s economic
recovery.
The IEA cut its 2021 global
oil demand growth forecast by
100,000 barrels a day, while
upgrading its 2022 forecast by
200,000 barrels a day.
Both the IEA and OPEC expect the world’s thirst for oil
to return to pre-pandemic
highs in the second half of
next year.
The Paris-based IEA said
the timing of the variant’s
spread has coincided with
planned supply increases from
the Organization of the Petroleum Exporting Countries and
its allies “stamping out lingering suggestions of a near-term
supply crunch or supercycle.”
OPEC, in its own report,
significantly upgraded supplygrowth estimates for its noncartel counterparts for both
2021 and 2022. The Viennabased cartel raised its 2022
supply-growth forecast by
840,000 barrels a day to 2.9
million barrels a day.
While OPEC expects Russia
to increase its production by a
million barrels a day next year,
it said “the U.S., with year-onyear growth of 0.8 million barrels a day, together with Brazil, Norway, Canada and
Guyana, will be the other key
drivers.”
Oil prices suffered a blow
Wednesday, after the White
House urged OPEC to boost oil
production, saying planned increases are insufficient to fuel
the post-pandemic economic
recovery. The remarks came as
the U.S. tries to tamp down
rising consumer prices, particularly that of gasoline.
Crude prices edged lower
Thursday, with Brent crude
oil—the global benchmark—
falling 0.2% to $71.31 a barrel
and West Texas Intermediate
futures, the U.S. gauge, dropping 0.2% to $69.09 a barrel.
U.S. crude is down 6.6% this
month, with the price rally
seen in much of 2021 foundering, largely due to worries
about the Delta variant.
Despite remarks Wednesday
from National Security adviser
Jake Sullivan suggesting
OPEC+ should pump more oil,
global demand may not keep
up with the supply already expected next year if OPEC and
its allies continue plans to unwind production cuts, the IEA
said.
Analysts have reacted to
the White House’s remarks on
OPEC production with skepticism and suggest it is unlikely
the cartel will accelerate the
pace at which it will relax production cuts.
“There will be quite a lot of
reluctance from the Saudis
and the broader group to increase output further, particularly given continued uncertainty over the spread of the
Delta variant,” said Warren
Patterson, head of commodities strategy at Dutch bank
ING.