Top oil producers confident that global demand will return strongly
The International Energy Agency and Opec hinted that global oil demand won't return to 2019 levels until at least 2022
Global oil markets, driven by surging Chinese demand, are bouncing back in the wake of confidence-building measures undertaken by the Opec leadership, oil giant Abu Dhabi National Oil Company (Adnoc) said.
Dr Sultan Ahmed Al Jaber, the UAE Minister of Industry and Advanced Technology and Adnoc Group's chief executive, has said measures taken by Opec and its leadership helped build confidence in the world oil markets.
"And as a result, we are seeing a robust return of oil demand. This is mainly coming from China. Having said that, our industry will have to remain cautious and nimble," Dr Al Jaber said in an interview with IHS Markit.
He said the oil market has visibly tightened over the past two months as economies started to reopen. The oil and gas industry needs to be "cautiously optimistic" about the structural macroeconomic changes and has to continue focusing on cost management.
"The world is going to need oil and gas for some considerable time to come. It is up to us as oil and gas producers to deliver that energy as responsibly and as sustainably as possible," he said.
Adnoc accounts for most of the oil in UAE, which is currently Opec's third-largest oil producer after Saudi Arabia and Iraq.
Saudi Arabia's Energy Minister Prince Abdulaziz bin Salman also voiced confidence that oil demand is set to recover to near pre-Covid-19 levels by the end of this year. He expects that oil demand will recover to 97 per cent of the levels pre-Covid. He noted that the oil market has shown signs of improvement with a drawdown in global inventories, a decline in floating storage, and a recovery in gasoline and diesel demand.
Earlier this month, Amin Nasser, the chief executive of the world's biggest oil-producing and oil-exporting company, state oil giant Saudi Aramco, said he was optimistic about the pace of oil demand recovery in Asia.
"We are seeing a partial recovery in the energy market as countries around the world take steps to ease restrictions and reboot their economies," Nasser said in a statement following Aramco's second-quarter report.
All these upbeat views on swift oil demand recovery came amid less optimistic forecasts by the International Energy Agency (IEA), the US Energy Information Administration and Opec, hinting that global oil demand won't return to 2019 levels until at least 2022 and the gap may be getting wider than it seemed a month ago.
For 2021 as a whole, the IEA cut its demand forecast by 240,000 bpd, the first downward revision since April, when the full impact of the coronavirus on oil demand first became apparent. "By December 2021, global oil consumption will still be two per cent lower than at the end of 2019," the Paris-based group said.
Ehsan Khoman, director and head of Mena Research and Strategy, said a fall in US supply would enable Opec+ to raise production from current levels to meet the recovery in demand.
"On net, despite this significant shale scale back, we view that the shale industry is to survive in a more consolidated, healthier contour - under stress near-term but promising outlook long-term [US shale liquids production will respond relatively quickly to higher crude prices as opposed to other non-Opec+ supply]. Succinctly put, US shale is down but not out," said Khoman.
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