The U.S. Energy Information Administration (EIA) has expressed optimism about oil demand growth owing to a stronger global economy this year, accelerating oil demand to 5.5 million barrels per day (bpd), a 200,000 bpd rise in its forecast, according to its Short-Term Energy Outlook for April.
With increase in vaccinations and stimulus from many governments, an improved oil demand is expected to assist oil producing countries improve production, compensating for cuts agreed upon by the cartels to check the impact of the pandemic.
Notwithstanding the optimism, oil prices are weak, hovering at $60 as concerns about the rising number of COVID-19 cases and imposed lockdown measures in Europe and many other countries around the world continue to be the main cause of uncertainty in the markets.
This week, Brent crude traded at $63.17, up by 0.35 per cent, while Nigeria’s Bonny Light rose to $61.55, up by 0.46 per cent.
The EIA noted that global economic growth is now expected at 6.2 percent in 2021, up by 0.4 percentage point from the March STEO, as per estimates from Oxford Economics, which the EIA uses for prediction modelling.
Next year, global oil demand is set to rise by another 3.7 million bpd over 2021 and exceed the pre-pandemic levels from 2019. World consumption of petroleum is set to average 101.3 million bpd in 2022, EIA’s latest estimates show.
The 2021 global oil demand growth was lifted by 200,000 bpd, while the 2022 growth estimate was revised down by 100,000 bpd from the March forecasts, which had pegged demand growth at 5.3 million bpd this year and 3.8 million bpd in 2022.
The EIA has slightly more conservative estimates about global oil demand growth than OPEC. The latest upward revision from the American administration puts this year’s demand growth still below OPEC’s estimate, which had it at 5.9 million bpd in its March Monthly Oil Market Report.
In its March report, OPEC raised its outlook for the second half of 2021, but revised down its estimates for oil demand for the first half of 2021 due to extended lockdowns in major economies in Europe and high unemployment rates in the United States slowing the recovery.
Last week, the OPEC+ Joint Technical Committee (JTC) revised down the demand growth estimate to 5.6 million bpd for 2021.
However, OPEC+ signaled confidence in demand rebounding strongly later this year by deciding to return around two million bpd by July by easing the production cuts by over one million and Saudi Arabia gradually reversing its extra 1-million-bpd cut.
“Forecast increases in global oil supply will contribute to a mostly balanced market during the second half of 2021. However, the forecast depends heavily on future production decisions by OPEC+, the responsiveness of U.S. tight oil production to oil prices, and the pace of oil demand growth, among other factors,” the EIA said in the April STEO.