Opec predicts strong oil demand rebound
Opec forecast oil demand in China and India would exceed pre-pandemic levels next year.
Opec on Thursday forecast a strong rebound in world oil demand in the rest of 2021 as it closed in on a critical deal to revive the production still shuttered since the pandemic.
As the group of oil producers continued its efforts to resolve the stalemate over boosting production, it predicted that oil use would rise in 2022 at similar to pre-pandemic rates, led by growth in the United States, China and India.
In its monthly report, Opec said demand next year would rise by 3.4 per cent to 99.86 million barrels per day (bpd), and would average more than 100 million bpd in the second half of 2022.
"Solid expectations exist for global economic growth in 2022," the 13-member nations’ group said. "These include improved containment of Covid-19, particularly in emerging and developing countries, which are forecast to spur oil demand to reach pre-pandemic levels in 2022."
“Looking ahead to 2022, risks and uncertainties loom large and require careful monitoring to ensure the recovery from the Covid-19 pandemic,” Opec said in its monthly report, which contained the first detailed estimates for next year.
The mixed outlook fits with plans by Opec and its allies – yet to be ratified – to gently restore the vast amounts of production they still have offline in monthly tranches of 400,000 barrels a day. Before that road map can be approved, the group must first resolve an impasse on raising output.
The UAE and Saudi Arabia have made progress in resolving a dispute over what the UAE says is an unfairly low output limit.
The report reflects the Organization of the Petroleum Exporting Countries’ confidence that demand will recover robustly from the pandemic, allowing the group and its allies to further ease record supply curbs made in 2020. Some analysts have said world oil demand may have peaked in 2019.
The report said 2019 demand averaged 99.98 million bpd and maintained Opec’s prediction that demand would grow by 5.95 million bpd in 2021.
Opec forecast oil demand in China and India would exceed pre-pandemic levels next year. It said the United States would make the biggest contribution to 2022 demand growth, although U.S. oil use would stay just below 2019 levels.
Oil was trading below $74 a barrel after the report was released. The price has climbed more than 40 per cent this year with the help of supply cuts by Opec and its allies.
Ehsan Khoman, director, head of Emerging Markets Research at MUFG Bank, said “the (in)ability of Opec+ to reach a formal agreement remains the defining price driver for oil markets, with the still-information vacuum on the group’s strategy keeping investors at bay.
“We are tactically neutral for the week ahead given counterbalancing forces –a tight physical oil market; a strengthening US dollar; the global macro momentum navigating rising alarm from the Delta variant of Covid-19 whilst mobility easings continue apace; and a yet formal Opec+ rapprochement,” said Khoman.
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