Oil prices edged higher above $70 a barrel on Friday, as the International Energy Agency said global oil demand would return to pre-COVID-19 pandemic levels by the end of next year.
Producers will need to increase output to keep up with demand recovery, the Paris-based energy agency said in its June oil market report. It forecasts demand to rise in 2021 before growing at a faster rate next year, reaching 100.6 million barrels a day (mb/d) by the end of 2022.
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Oil prices edged higher above $70 a barrel on Friday, as the International Energy Agency said global oil demand would return to pre-COVID-19 pandemic levels by the end of next year.
Producers will need to increase output to keep up with demand recovery, the Paris-based energy agency said in its June oil market report. It forecasts demand to rise in 2021 before growing at a faster rate next year, reaching 100.6 million barrels a day (mb/d) by the end of 2022.
The market “can’t ignore the clearly bullish signal” from the IEA report, in which the IEA calls for more oil to be produced by OPEC+, the Organization of the Petroleum Exporting Countries and their allies, “to meet the oil demand recovery of 2022,” said Louise Dickson, oil markets analyst at Rystad Energy.
“Supply conservatism by OPEC+ has supported oil prices since last year and is the reason prices have now reached such highs,” she said in a daily note. “There is definitely room for OPEC+ to boost output from the second part of this year and as long as this doesn’t happen, there is a definite upside for oil prices.”
In Friday dealings, West Texas Intermediate crude for July delivery CL00 CLN21 rose 46 cents, or 0.7%, to $70.75 a barrel on the New York Mercantile Exchange, headed for a weekly rise of around 1.7%.
Front-month WTI prices finished at $70.29 on Thursday, the highest finish since October 2018, according to Dow Jones Market Data.
August Brent crude, the global benchmark BRN00 BRNQ21 , added 30 cents, or 0.4%, to $72.82 a barrel on ICE Futures Europe. Brent, which closed at $72.52 a barrel Thursday, the highest since May 2019, was on track for a weekly climb of more than 1%.
The IEA said that following the record decline of 8.6 mb/d in 2020, global oil demand was now forecast to rebound by 5.4 mb/d in 2021 and a further 3.1 mb/d in 2022. “The recovery will be uneven not only among regions but across sectors and products. While the end of the pandemic is in sight in advanced economies, slow vaccine distribution could still jeopardize the recovery in non-OECD countries,” it said.
The IEA also said there was scope for OPEC+ to boost production by 1.4 mb/d above its July 2021 to March 2022 target. “Our first detailed look at 2022 balances confirms earlier expectations that OPEC+ needs to open the taps to keep the world oil markets adequately supplied.”
Earlier this month, OPEC+ agreed to keep its current plan to gradually increase oil production through July in place, sending crude oil futures to their highest settlements in more than two years. It’s next meeting will be held July 1.
There were still a number of factors that could affect the speed at which OPEC+ can reverse its pandemic-induced production cuts, the IEA said. “The pace at which the OPEC+ cuts can be unwound will depend not only on the success in containing the spread of the virus and demand growth but also the timing of the eventual return of Iranian barrels to the market.”
The Energy Information Administration on Wednesday reported a weekly jump in U.S. gasoline inventories and a fall in implied demand for the fuel.
“The recent decline in demand could revert higher as the summer driving season progresses and as rising economic activity supports distillate demand,” Marshall Steeves, energy markets analyst at IHS Markit, told MarketWatch. “The recovery in the U.S. economy is still expected to drive global growth overall.”
“U.S. crude stocks are below normal at a four-month low, and could tighten further as demand is expected to increase through the summer,” he said.
Meanwhile, “Iran is a wildcard, depending on the outcome of nuclear talks,” said Steeves. “If successful, another one million bpd in exports could result, and OPEC would need to respond to that.”
Among the petroleum products traded on Nymex Friday, July gasoline RBN21 fell 1.1% to $2.19 a gallon, set for a weekly decline of 1% for the week, while July heating oil HON21 lost 1.1% to $2.12 a gallon, trading almost flat from the week-ago finish.
July natural gas NGN21 , however, rose 3.7%, to $3.27 per million British thermal units, with prices up over 5% for the week.
The EIA on Thursday reported an increase of 98 billion cubic feet in last week’s U.S. supplies of the fuel, which came in above the first-year average for the period, said Christin Redmond, commodity analyst at Schneider Electric.
But “with record high temperatures expected for some parts of the Western U.S. over the next couple of weeks, that trend may reverse, as higher cooling demand drives higher demand for gas from power generators,” she said in a market update.
Barbara Kollmeyer in Madrid contributed to this report.
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June 11, 2021 at 06:36PM
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Oil rises as IEA sees global demand returning to pre-pandemic levels in 2022 - MarketWatch
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