Despite the delay in vaccine rollouts in both the European Union (EU) and developing countries, and the reduced effectiveness of some vaccines against new variants, the latest KAPSARC Oil Market Outlook for Q2 2021 (KOMO) forecasts that total global oil demand is expected to increase by 4.3 MMb/d in 2021 to 96.3 MMb/d then by 3.2 in 2022, whereas total global oil supply is expected to grow by 1 MMb/d in 2021, with a stronger recovery of 3.4 MMb/d in 2022.
In its analysis, KAPSARC emphasized that the global average GDP is expected to reach pre-COVID-19 levels by the end of 2021. It is also expected that global liquids supply to grow by about 1.025 MMb/d in 2021 to reach an average of 95.2 MMb/d for the year. Most of the supply, is expected to come from OPEC+ members as they gradually ease their cuts.
The report showed that the developing countries appear to be leading the oil demand rebound, while many OECD members will only reach their pre-COVID-19 oil demand levels in 2022. KOMO also assumed that OPEC+ aims to maintain a modest deficit throughout the next eight quarters.
KOMO highlighted that Saudi Arabia’s oil demand should rebound by 40 Kb/d in 2021 then continue rising by a further 30 Kb/d in 2022, due to its seasonal increase in demand for electricity generation. That will also lead to a rise in the total oil demand by around 550 Kb/d in Q2, 2021.
KAPSARC examined several other factors impacting oil markets over the next two years:
Demand dynamics: The sustainability of demand growth hinges on the impact of the COVID-19 vaccinations and the speed of their distribution on the recovery in economic activity and travel. The report expected that the demand growth will be continued economic recovery and seasonal consumption patterns, and that the most significant QoQ growth will come from the U.S. followed by the Middle East, particularly Saudi Arabia’s seasonal growth. The report expect growth of around 800 Kb/d in the U.S. and 600 Kb/d in the Kingdom, respectively for this quarter.
Supply dynamics: expects that OPEC+production (all liquids) will grow this quarter by around 700 Kb/d and around 1.4 MMb/d in Q3 2021, including the planned reduction in Saudi Arabia’s additional voluntary cuts (based on the assumption that OPEC+ July targets remain in place throughout Q3 2021). The relaxation of production is expected to follow suit in Q4 2021 by around 500 Kb/d before halting in Q1 2022. We expect this to reverse temporarily as the winter season reduces demand growth and OPEC+ members focus on maintaining inventory deficits to reach ‘normal’ pre-pandemic five-year average levels.
Risks: KOMO’s risk categories are based on survey results highlighting different attributes impacting the oil industry.
Read the full report here for key findings from the quarterly KAPSARC Oil Market Outlook and more insights into the future of oil.