IEA raises 2021 world oil demand forecast by 230,000 b/d on firm economic recovery - S&P Global

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Highlights

Economic indicators more robust as stock continue to fall

US oil demand estimates raised by 370,00 b/d for Q4

Seems near-term risk of downward pressure on oil prices

London — The International Energy Agency has sharply raised its world oil demand estimate for 2021, pointing to further signs that the global economy is recovering faster than previously expected, particularly in the US and China.

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Stronger economic forecasts and "robust" indicators of prompt demand mean the global oil demand will grow 230,000 b/d faster than previously forecast, the IEA said in its latest monthly oil market report published April 14.

World oil demand is now expected to expand by 5.7 million b/d in 2021 to 96.7 million b/d, following a collapse of 8.7 million b/d last year, the IEA said.

Supported by a quick vaccine rollout and a massive economic stimulus package, the IEA said it revised up its US oil demand forecast for the second half of the year by around 365,000 b/d. It's Chinese oil consumption forecast for 2021 was also raised by 160,000 b/d.

"Oil markets fundamentals look decidedly stronger," the IEA said. "The massive overhang in global oil inventories that built up during last year's COVID-19 demand shock is being worked off, vaccine campaigns are gathering pace and the global economy appears to be on a better footing."

The IEA said OECD industry stocks fell for the seventh consecutive month in February, down 55.8 million barrels, or 2 million b/d, led by a sharp draw in product inventories.

At end-February, total oil stocks stood at 2.977 billion barrels, down from a peak of 3.216 billion barrels in May 2020, and reducing the overhang versus the 2016-2020 average to 28.3 million barrels.

In March, industry stocks rose by a combined 15.3 million barrels in the US, Europe and Japan, the IEA said citing preliminary data.

Even global refinery throughputs caught up with year-earlier levels in March for the first time since 2019, the IEA noted. At 75.9 million b/d, however, global refinery runs remained 4.4 million b/d below March 2019 levels.

Downward price risk

The IEA cautioned, however, that oil prices could yet come under "renewed pressure" in the coming months as world oil supplies are set to ramp up and shift the market from deficit towards balance.

The IEA's latest demand and supply estimates show nearly 2 million b/d of extra supply may be required to meet expected demand growth -- even after factoring in the announced ramp-up of OPEC+ production.

The IEA reiterated that the oil market does not face an "impending supply crunch", however, noting that OPEC+ will still have some 6 million b/d of spare production capacity, while 1.5 million b/d of Iranian crude remain shut in by sanctions.

The IEA estimates that global oil output could rise in 2021 by 1.4 million b/d compared to a 6.6 million b/d loss in 2020. In the US, the world's biggest oil producer, the IEA said it expects to see supplies ease by 100,000 b/d in 2021 after falling by nearly 600,000 b/d in 2020.

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