BAKU, Azerbaijan, Jan.18
By Leman Zeynalova – Trend:
The US JP Morgan Bank further downgrades 1Q21 demand by 820 kbd, but sees global oil demand increasing from 93 mbd this quarter (-6 percent vs 2019) to 99 mbd in 4Q21 (-2 percent vs 2019) before finally pulling even with pre-pandemic 2019 levels in May 2022, Trend reports.
“What has changed is OPEC+’s partial freezing of production growth over February and March and Saudi’s determination to cut 1 mbd of production during the same months when demand is expected to rebound sharply. Despite large demand downgrades we only see 200 kbd surplus in 1Q21 and rapidly tightening markets thereafter (-1.8 mbd), despite OPEC+ increasing production by 2 mbd. This essentially suggests that in order to normalize “stubbornly high” inventories, about 5 mbd of OPEC+’s spare capacity will need to remain out of the market for the entirety of 2H21,” said the Bank in its latest report.
“While we wait for further clarity in mobility tracking following the holidays, we are also now expecting longer and more stringent restrictions throughout the first quarter, particularly in Europe but also throughout Asia. While formal lockdowns will still likely be rarer in the US, we nonetheless expect high case counts amid the ongoing vaccine distribution will also dampen activity in 1Q. Subsequently, we have downgraded 1Q21 demand by 820 kbd globally led by cuts to gasoline demand (-250 kbd), jet fuel (-260 kbd) and diesel (-190kbd). From a monthly perspective, the deepest cuts come in January (1.2mbd)but we have also significantly trimmed February and March by 720 kbd and 570 kbd, respectively. Even with these cuts, in part due to some seasonality feeding through as well as moving beyond the most stringent point of lockdowns, we do still see global demand moving higher again out of its January pothole beginning next month.”
Regionally the cuts to 1Q are pretty broad-based with Europe accounting for around 180 kbd of the downgrade and the US contributing 100 kbd, according to the report.
“We have also trimmed demand in Asia by 210 kbd with drops in road fuel and jet demand being slightly offset by stronger heating demand given the colder winter. Overall, we now look for global demand to average 92.9 mbd in 1Q21, roughly 6 percent lower than 2019 levels, with January averaging 90.7 mbd or 8 percent lower yoy.”
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