Opec sees world oil demand reaching pre-virus level in 2022 - GulfToday

Opec sees world oil demand reaching pre-virus level in 2022


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Opec forecast on Thursday that world oil demand would rise in 2022 to reach a level similar to before the pandemic, led by growth in the United States, China and India.

The organisation of the Petroleum Exporting Countries said in its monthly report that demand next year would rise by 3.4% 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,” Opec 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.”

The report reflects Opec’s 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.

In the report, Opec also maintained its prediction that demand would grow by 5.95 million bpd or 6.6% in 2021.

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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 US oil use would stay just below 2019 levels.

World economic growth was expected to slow to 4.1% next year from 5.5% in 2021, still supported by government stimulus and with the outlook “depending primarily on COVID-19-related developments”, Opec said.

Oil was trading below $74 a barrel after the Opec report was released. The price has climbed more than 40% this year with the help of supply cuts by OPEC and its allies, a group known as Opec+.

The report showed higher output from OPEC and forecast more supplies from rivals in 2022, including US shale producers.

Opec+ agreed in April to gradually ease output cuts from May to July. Thursday’s report showed Opec production in June rose 590,000 bpd to 26.03 million bpd.

The report implies a wider supply deficit in the fourth quarter of 2021, assuming Opec+ does not agree a further increase and based on Iran, Libya and Venezuela, which are exempt from Opec+ cuts, sticking to their June production levels.

The report forecast a 2.1 million bpd rise in supply from Opec’s rivals in 2022 as higher prices spur investment. Opec sees output of US shale oil, another term for shale, rising by 500,000 bpd in 2022, after a contraction this year. The extra barrels will limit growth in demand for Opec crude next year but Opec still sees the world needing 28.7 million bpd from its members, up 1.1 million bpd from 2021 and, in theory, allowing higher Opec production.

Separately, oil prices fell on Thursday, extending losses as investors braced for increased supplies after a compromise deal between leading Opec producers and as US fuel stocks rose, raising concerns over demand in the world’s largest consumer.

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Brent crude dropped 66 cents, or 0.9%, to $74.10 a barrel by 1410 GMT and US West Texas Intermediate (WTI) crude was down 61 cents, or 0.8%, at $72.52.

“The market is not taking any chances. Prices are very overbought anyway, so traders might want to take some money off the table before the deal is concrete,” said Avtar Sandu, senior commodity trader at Phillips Futures in Singapore.

“With the oil market already in deficit and demand growth outpacing supply growth, the crude market will likely tighten further this summer,” said UBS analyst Giovanni Staunovo.

“We believe ongoing declines in global oil inventories could boost Brent to $80 per barrel and WTI to $77 per barrel between now and September.”

China’s crude oil: China’s crude oil throughput hit a record high in June, rising 3.9% on a daily basis from the previous record set in May as more refineries resumed operations after maintenance.

The country processed 60.82 million tonnes of crude oil last month, or 14.8 million barrels per day (bpd), data from the National Bureau of Statistics (NBS) showed on Thursday.

That was up from 14.25 mln bpd in May, and was also higher than 14.08 mln bpd in June last year.

Total throughput during the first half of 2021 reached 353.35 million tonnes, or 15.13 million bpd, up 10.7% from the same period in 2020.

Chinese refineries slowed oil processing in the second quarter for planned maintenance. Around 38 million tonnes per annum of refining capacity had been expected to return online at state oil giants Sinopec and PetroChina from late May to early June, according to data from S&P Platts.

Average utilisation rates at independent refining plants in Shandong province were 73.81% as of June 30, up from 66.7% in late May, data tracked by China-based Sublime consultancy showed.

However, analysts from FGE expect run rates at Shandong independent refineries to fall by around 490,000 bpd to an average of 1.75 million bpd in the third quarter due to reduced crude oil imports quotas and a clampdown on illicit quotas trading.


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