IEA cuts Q3 2021 oil demand growth by 700,000 bpd on China slowdown
Quantum Commodity Intelligence - The International Energy Agency (IEA) has revised downwards oil demand growth for the balance of the year, primarily on the slump in Chinese demand as a result of mobility restrictions, the agency said its monthly report Thursday.
In its latest figures, the IEA sees 3Q 2021 global oil demand averaging 97.4 million bpd, compared to its July report forecast of 98.1 million bpd, which compares to 94.9 million bpd in Q2 of this year and 93.4 million bpd in Q1.
Following a month-on-month demand surge of 3.8 million bpd in June, the IEA said demand growth 'abruptly' reversed course in July.
"We now estimate that demand fell in July (down 120,000 bpd m-o-m), as the rapid spread of the Covid-19 Delta variant undermined deliveries in China (down 760,000 bpd m-o-m), Indonesia (down 130,000 bpd m-o-m) and other parts of Asia," said the report, released Thursday.
Annual 2021 global demand is forecast at 96.2 million bpd, down from 96.4 million bpd in the previous month's report.
For 2022, average demand is seen at 99.3 million bpd, versus 99.5 million bpd in its July report.
"Second-half 2021 oil demand has been lowered by over 500,000 bpd since last month's Report. Global oil demand is now seen rising 5.3 million bpd on average to 96.2 million bpd in 2021, and a further 3.2 million bpd in 2022."
In growth terms, the IEA said global oil demand is now forecast to climb 2.5 million bpd quarter-on-quarter (q-o-q) in 3Q21, and by 5.3 million bpd year-on-year (y-o-y), while demand is set to rise another 1.4 million bpd q-o-q in 4Q21, before falling seasonally in 1Q 2022.
Supplies
On the production side, the Agency said the global oil supply is ramping up quickly.
In July, producers boosted output by 1.7 million bpd, as Saudi Arabia ended voluntary curbs and the North Sea bounced back from maintenance. Supply is expected to rise further after the producer bloc agreed on a deal on 18 July that aims to raise production by 400,000 bpd a month from August until the remaining cuts are phased out.
Global oil inventories, meanwhile, continue to fall sharply, said the report. In June, OECD industry stocks plunged by a 'hefty' 50 million/b, or 1.7 million bpd, to stand 131 million/b below the five-year average.
The report said stock draws could persist for the remainder of the year assuming sanctions continue to shut out Iranian crude from international markets.
"Based on our current balances, OPEC+ looks set to pump about 200,000 bpd below the call on its crude during the last quarter of 2021, compared with a deficit of up to 2 million bpd expected earlier."
The Americas continued to lead the demand recovery, increasing seasonally by 665,000 bpd m-o-m in May, an estimated 740,000 bpd in June and 375,000 bpd in July.
However, Chinese economic activity is slowing and the pace of oil demand growth should soften in 2022, said the IEA, with demand growth set to slow from 1.2 million bpd in 2021 to 560,000 bpd in 2022.
