Delay in oil demand recovery to put downward pressure on prices – Rystad Energy

Oil&Gas Materials 2 September 2021 14:40 (UTC +04:00)
Delay in oil demand recovery to put downward pressure on prices – Rystad Energy

BAKU, Azerbaijan, Sept.2

By Leman Zeynalova – Trend:

OPEC+ and most observers expect global oil demand to rise towards 99 million bpd by year-end, from currently 96-97 million bpd, a delay towards this recovery would put downwards pressure on prices and flip the supply-demand balance into slight surplus to year-end, Bjornar Tonhaugen, Head of Oil Markets at Rystad Energy, a Norway-based independent energy research and business intelligence company, told Trend.

At the moment though, the markets are sanguine and in wait-and-see mode with limited price moves thus far today, he said.

“As we suspected, oil moved in a classical “buy the rumor, sell the fact” pattern, on a non-surprise decision by OPEC. Prices declined slightly just before the expected OPEC+ decision, just ahead of the weekly US DOE stocks numbers, which owing to a surprisingly large drop in PADD 3 crude stocks marginally supported crude prices during US hours,” noted Tonhaugen.

He went on to add that this morning, prices are sideways, waiting for the next impetus to change expectations for the short-term recovery path of demand and supply.

“The US oil industry is rushing to restore operations following Hurricane Ida. US refiners in Louisiana still have 1.7 million bpd crude processing capacity offline as of yesterday, of the initial 2.3 million bpd initial peak capacity outage. The US GoM oil producers have also managed to restore 16 percent of the initial production losses according to BSEE yesterday, for a total outage of 80 percent vs. 96 percent at the peak. The 1.4 million bpd of offline US GoM oil production, mostly medium-sour, will most likely be able to return more quickly than onshore refining capacity due to the power outages in Louisiana onshore. Prices for sour grades such as Mars and LatAm grades relative to WTI-like US onshore grades will see short-lived support until GoM production is fully restored,” added the expert.

Tonhaugen noted that the next impetus for price may not come today, as the economic calendar is thin today while supply from OPEC+ has been forward guided for yet another month:

“It could however come from the demand side, as the world continues to grapple with the Covid variants. Rising cases in India has raised concerns for a third wave there, which could risk the demand recovery underway there.”


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