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Supply/Demand: Tempered Summer Demand Bonanza Sees More Opec-Plus Oil

Copyright © 2021 Energy Intelligence Group
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The oil market looks much more similar to what it was before the pandemic, and oil demand has been rising fast over the summer -- just not as fast as expected as the spread of the pandemic has limited mobility in the Northern Hemisphere (OMI Jul.19'21). Mobility will remain under pressure (related). Nevertheless, the inventory draws in July were impressive at 3.1 million barrels per day, and August promises to be close to that volume. After that, draws can slow to around 1 million b/d, depending on the oil price and market conditions. Oil demand didn’t hit 100 million b/d as forecast, but preliminary data suggest that it came close at 99.5 million b/d. The August forecast still sees demand reaching 100.3 million b/d. Recent months have shown revisions to demand, and the latest set of data is no exception. Tracing the pace of recovery from both the pandemic and subsequent economic slump to measures preventing the spread of the Covid-19 virus have eluded economic models. But some normalization seems to be over the horizon as the world approaches 2019 levels, although jet fuel remains the main laggard. Since July, the market’s basic price drivers have seen major changes. Just as the Delta variant is adding uncertainty over the demand recovery, Opec-plus has decided to add more oil to market (related). And expectations that the US and Iran might strike a nuclear deal soon are now tempered, which is delaying a flood of new Iranian barrels coming to market. Unchanged is the economic stimulus in the US, where trillions of dollars in additional national projects are under discussion. The tightness of the crude market is now somewhat looser, and this has taken the steam out of the price rally. But Brent is sticky at $70, and even though the prompt premium over supplies in six months has halved to $2 per barrel over the past month, there is still a premium. That signals a market where supply is lower than demand and that inventories continue declining (related). Even with China draining stocks and refineries moving toward maintenance, Opec-plus remains firmly in the driver’s seat. COVID-19 RESHAPES GLOBAL OIL SUPPLY & DEMAND BALANCE (million b/d) 2021 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Year Demand OECD-34 42.2 41.8 43.9 43.5 43.4 45.1 46.9 47.2 46.2 46.3 46.6 46.2 45.0 Non-OECD 52.3 51.6 51.1 50.8 51.5 52.6 52.7 53.1 53.0 53.5 53.6 53.7 52.5 Total Demand 94.5 93.4 95.0 94.3 94.9 97.8 99.5 100.3 99.2 99.8 100.2 100.0 97.4 Supply Opec Crude 25.6 25.1 24.9 25.3 25.4 26.0 26.4 27.1 27.4 27.6 27.8 27.8 26.4 Opec NGL/Cond 5.2 5.3 5.3 5.2 5.2 5.2 5.1 5.3 5.1 5.1 5.3 5.3 5.2 Non-Opec 61.0 58.4 61.5 61.8 61.9 62.3 62.7 63.0 63.4 63.7 63.3 63.0 62.2 Processing Gain 2.1 1.8 2.1 2.2 2.2 2.2 2.2 2.2 2.2 2.2 2.3 2.3 2.2 Total Supply 93.9 90.7 93.8 94.5 94.8 95.7 96.4 97.6 98.1 98.6 98.7 98.4 96.0 Stock Change -0.6 -2.7 -1.2 +0.2 -0.1 -2.0 -3.1 -2.7 -1.1 -1.2 -1.5 -1.6 -1.5 Refining Crude Runs OECD-34 33.4 31.2 33.2 34.0 33.9 34.8 35.1 35.3 35.2 35.1 35.5 35.5 34.4 Non-OECD 43.7 43.4 43.3 43.3 43.1 44.0 43.5 43.9 44.1 44.2 44.7 44.3 43.8 Total Crude Input 77.1 74.6 76.5 77.3 77.1 78.8 78.6 79.3 79.3 79.3 80.2 79.9 78.2 GLOBAL OIL SUPPLY & DEMAND BALANCE (million b/d) 2021 2020 2021 2022 Demand May Jun Jul Jul Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year OECD-34 43.4 45.1 46.9 42.3 42.7 44.0 46.8 46.4 45.0 44.5 46.9 46.5 46.0 46.4 Non-OECD 51.5 52.6 52.7 50.7 51.7 51.7 52.9 53.6 52.5 53.5 41.7 43.3 45.2 54.0 Total Product Demand 94.9 97.8 99.5 93.0 94.4 95.6 99.7 100.0 97.4 98.0 98.3 102.4 102.5 100.3 Supply Opec Crude 25.4 26.0 26.4 23.5 25.2 25.6 26.9 27.7 26.4 27.4 28.0 28.8 29.2 28.3 Opec NGL/Cond. 5.2 5.2 5.1 5.2 5.3 5.2 5.2 5.3 5.2 5.3 5.2 5.2 5.3 5.2 Non-Opec 61.9 62.3 62.7 60.4 60.4 62.0 63.0 63.3 62.2 63.0 63.8 65.0 65.0 64.2 Processing Gain 2.2 2.2 2.2 2.0 2.0 2.2 2.2 2.3 2.2 2.2 2.2 2.3 2.3 2.2 Total 94.8 95.7 96.4 91.1 92.9 95.0 97.4 98.6 96.0 97.8 99.2 101.2 101.8 100 Stock Change to Balance -0.1 -2.0 -3.1 -1.9 -1.5 -0.6 -2.3 -1.4 -1.5 -0.2 +0.8 -1.2 -0.6 -0.3 Observed Chg. in Stocks* -1.4 -2.3 -2.0 -5.0 -1.7 -1.9 Missing Barrels† +1.3 +0.3 -1.1 +3.1 +0.2 +1.3 2021 2020 2015 2016 2017 2018 2019 2021 2021 Refinery Inputs May Jun Jul Jul Year Year Year Year Year Q3 Q4 Year Q1 Q2 OECD-34 33.9 34.8 35.1 32.3 37.9 37.8 38.9 38.6 38.1 32.5 32.5 33.1 32.7 34.2 Non-OECD 43.1 44.0 43.5 41.1 41.9 42.4 42.8 43.7 44.2 41.4 42.8 41.4 43.5 43.5 Total Refinery Inputs 77.1 78.8 78.6 73.5 79.8 80.2 81.6 82.3 82.3 73.9 75.3 74.5 76.1 77.7 *Based on OMI's global inventory levels (p6). †Defined as implied stock change minus observed stock change.

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