The World Has Almost Used Up Its Pandemic Oil Glut, IEA Says
By David Hodari
Just over a year after collapsing crude prices forced
oil-exporting countries to enact historic production cuts, the
supply glut that accrued during the most extreme pandemic
restrictions has almost returned to normal levels, the
International Energy Agency said Wednesday.
Those observations came in the IEA's closely-scrutinized monthly
market report. The agency caveated them by cutting its 2021 global
demand growth forecast by 270,000 barrels to 5.4 million barrels a
day. Demand in Europe and the Americas in the first quarter was
weaker than previously thought, the IEA said. The agency cut its
second-quarter forecast for Indian demand as the country struggles
with high coronavirus infection rates.
The Paris-based organization left its demand estimates for the
second half of the year unchanged, adding that vaccination rollout
programs, rebounding economic activity, and easing transport
restrictions in the U.S. and Europe clear the way for crude demand
to begin outstripping supply later this year.
The agency expects demand to outstrip supply even after the
Organization of the Petroleum Exporting Countries and its allies
ease their continuing output cuts. The IEA cut its already moderate
supply growth forecast for non-alliance producers to roughly half
the amount of last year's contraction, while also forecasting a
further drop in U.S. production in line with OPEC's forecast this
The supply stocks held by the wealthy nations of the
Organization for Economic Cooperation and Development slipped to
1.7 million barrels above its five-year average of 2016-2020, the
IEA said. "Anticipated supply growth through the rest of this year
comes nowhere close to matching our forecast for significantly
stronger demand beyond the second quarter," it said.
Oil prices edged higher on Wednesday, with Brent crude--the
global benchmark--up 1% at $69.20 a barrel. West Texas Intermediate
futures, the U.S. benchmark, were also up 1% at $65.95 a barrel
after the American Petroleum Institute released weekly inventory
data showing stocks dropped by roughly the amount previously
forecast, according to ING analyst Warren Patterson.
Despite the IEA's forecast that the world will resume winnowing
its glut of oil from next month, significant risks to the agency's
outlook remain in both supply and demand. The market is currently
India continues its battle to keep coronavirus variants at bay.
The subcontinent is currently experiencing more than 400,000 new
cases a day and its struggle prompted the IEA to cut its
second-quarter demand forecast by 13%.
Restrictions are easing and mobility is improving in other
Covid-19 problem areas like Brazil, but India's example shows how
fragile the post-pandemic economic recovery can be, the IEA
While the plans of OPEC and its allies to bring back millions of
barrels of held-back supply in the coming months won't derail the
oil market's tightening, the prospect of a rapprochement between
the U.S. and Iran might mean millions of extra barrels of crude
returning to the market.
Washington and Tehran are currently engaged in indirect
negotiations to revive their nuclear deal and warmer relations
might clear a path for the 2.4 million barrels Iran is currently
producing to be freely traded.
Even accounting for Iranian barrels, OPEC+ would still be
producing 1.7 million barrels of oil a day fewer than the rate at
which the world is forecast to consume it in 2021's fourth
In line with some of the forecasts made by the agency and by
OPEC over the past year, the IEA expects global oil demand to have
almost returned to its pre-pandemic "normal" level by the end of
this year. The organization expects demand in the fourth quarter to
be 120,000 barrels a day fewer than it was in the same quarter of
Write to David Hodari by email@example.com
(END) Dow Jones Newswires
May 12, 2021 04:16 ET (08:16 GMT)
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