IEA raises global oil demand forecast

London, (Quantum Commodity Intelligence) - The recovery in global oil demand is accelerating and should rebound 5.7 million b/d in 2021 after contracting 8.7 million b/d last year, the International Energy Agency forecast in its April Oil Market Report.

Despite weaker-than-expected data in the first quarter, annual growth has been revised up by 230,000 b/d from the March forecast to take account of better economic forecasts and robust prompt indicators.

"The massive overhang in global oil inventories that built up during last year's Covid-19 demand shock is being worked off, vaccine campaigns are gathering pace and the global economy appears to be on a better footing," the IEA noted.

Earlier this month, the International Monetary Fund raised its forecasts for global GDP growth to 6% this year and 4.4% next year.

But the recovery in oil demand remains fragile, however, with the number of Covid cases surging in some major consuming countries, the IEA added.

Preliminary data suggest OECD oil stocks held largely steady in March, following seven consecutive months of draws.

In February, OECD oil inventories fell by 55.8 million barrels, or 2 million b/d.

However, February OECD stocks still stood at 2,977 million barrels, 28 million barrels above the 2016-2020 average, and 94 million barrels higher than a year ago.

Meanwhile, world oil supplies are increasing.

Global production was already on the rise in March, increasing by 1.7m b/d as US output recovered from a sharp drop in February and OPEC+ supply edged higher.

Iran has been opening up the taps since late last year, defying US sanctions, with its crude production now at the highest in nearly two years.

More oil is on the way after OPEC and its allies agreed on April 1 to gradually ease output cuts by more than 2 mb/d from May through July.

But even with new barrels this quarter, the IEA thinks an extra 2 million b/d of supply will be needed in the latter half of this year to meet the expected growth in oil demand.

Global refinery runs are forecast to rise by 6.8 mb/d from April to August, just as crude oil-fired power generation rises seasonally.

However, a supply crunch is far on the horizon.

By July, OPEC and its allies will still have close to 6 million b/d of effective spare production capacity, excluding some 1.5 million b/d of Iranian crude now shut in by sanctions.