BAKU, Azerbaijan, Feb.1
By Leman Zeynalova – Trend:
A substantial oil supply-demand gap should open in 2H21, Trend reports citing the US JP Morgan Bank.
“Iraq announced plans to institute compensation cuts for exceeding its OPEC+ output quota in2020. In Libya, production has risen back to 1.25 mbd after an outage to a major pipeline was resolved. However, output is now facing threats of a workers' strike. Supply is tightening further with Russia planning to cut its Urals crude exports by almost 20%. Somewhat offsetting this, Iran’s exports are set to increase this month. That said, a majority of the supply headlines this week came from the US where the Biden administration announced a pause on new oil and gas leases on federal lands and waters, while a “rigorous review” takes place.
With these changes in place, the fundamental backdrop hasn't changed. While recovery in oil demand will likely be uneven and will take more time to recover fully, crude supply is shrinking much faster. OPEC+ will remain disciplined until demand fully recovers to 2019 levels somewhere in 1H22 and will bring only about 2 mbd of crude back into the market this year in order to draw down inventories.
While the team does not believe the initial steps taken by the Biden administration will have any impact on US near-term producer activity, it will likely keep shale supply growth in check over the long term. Overall, the global oil market should tighten rapidly from February and remain very tight through mid-2022. Assuming that the US shale is slower to respond to higher oil prices, a substantial supply-demand gap should open in 2H21, resulting in Brent oil prices trading at over $70/bbl by year-end 2021,” said the Bank.
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