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Oil market may need extra supply in 2H 2021

Oil&Gas Materials 15 April 2021 11:54 (UTC +04:00)
Oil market may need extra supply in 2H 2021

BAKU, Azerbaijan, Apr.15

By Leman Zeynalova – Trend:

April should see OPEC+ continue to restrict supply by nearly 8 mb/d, with Riyadh vowing to deliver its additional voluntary cut for a third month, Trend reports citing the International Energy Agency (IEA).

A gradual relaxation of the group’s curbs during May and June, along with increased supply from those outside OPEC+, should lead to a more balanced market in the second quarter, IEA said in its latest report.

“But the outlook changes dramatically in 2H21, when a strong improvement in demand growth suggests that nearly 2 mb/d of extra supply may be needed to keep the market in balance. That is after factoring in higher output from non-OPEC+ and the anticipated May-July OPEC+ supply boost. The bloc’s current monthly fine-tuning of supply could give OPEC+ ministers the flexibility to ramp up relatively quickly to fill any substantial gaps that may emerge. And OPEC+ will still have nearly 6 mb/d of effective spare capacity, which excludes some 1.5 mb/d of Iranian crude currently shut in by sanctions. For its part, Iran has been turning up the taps since late last year in defiance of US sanctions, with crude supply now at the highest in nearly two years,” reads the report.

As things stand, IEA’s current estimates suggest global oil output could rise in 2021 by 1.4 mb/d compared to a 6.6 mb/d loss in 2020.

“OPEC+ is due to ramp up by 800 kb/d this year after a 2020 decline of 5.3 mb/d if it proceeds with an agreed supply increase, Libya sustains its recovery and Iran remains under sanctions. Production from those outside the group rises from 45.5 mb/d in March to 47.2 mb/d by the end of the year, resulting in annual average growth of 610 kb/d versus a 2020 decline of 1.3 mb/d. For the United States, the world’s biggest oil producer, we now expect to see supplies ease by 100 kb/d in 2021 after falling by nearly 600 kb/d in 2020. Canada delivers significant gains in 2021 after declining last year, while Brazil, Norway and Guyana continue along their growth trajectories.”

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Follow the author on Twitter: @Lyaman_Zeyn

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