IEA says June oil demand surged 3.2 mil bpd, warns of supply crunch
Quantum Commodity Intelligence – The International Energy Agency (IEA) Tuesday reported a demand surge of 3.2 million barrel per day in June versus May, but has maintained its 2021 demand growth forecast at 5.4 million bpd while trimming its 2022 growth outlook by 100,000 bpd to 3 million bpd.
The IEA also cautioned that oil markets will "tighten significantly" unless OPEC+ can find a compromise and resolve the current stalemate over production levels.
"Following two consecutive months of decline, global oil demand surged by an estimated 3.2 million bpd to 96.8 million bpd in June," said the IEA in its July report released Tuesday, but warned that escalating Covid-19 cases in a number of countries remain a key downside risk to its latest forecast.
The June gains more than compensate for the losses in April and May, including a sharp 1.8 million bpd contraction in April, with India hardest hit by the initial wave of the Covid Delta variant.
In its latest figures, the IEA sees 3Q 2021 global oil demand averaging 98.1 million bpd, compared to 94.7 million bpd in Q2 and 93.6 million bpd in Q1.
The report said its oil demand growth forecast mirrors the economic trend, noting world GDP is likely to expand by 6.2% in 2021 and 4.6% in 2022, including US GDP growth at close to 7% in 2021.
The IEA said that the overhang in global oil inventories that built up last year has already been worked off, with OECD industry stocks now, "well below historical averages".
OECD total industry stocks however rose by 18.1 million/b in May to stand at 2.945 billion/b, 75.8 million/b below the 2016-2020 average and 10.8 million/b below the pre-Covid 2015-19 average.
Preliminary June data for the US, Europe and Japan show that industry stocks fell by a combined 21.8 million/b.
Crunch
Meanwhile, the OPEC+ stalemate means that until a compromise can be reached production quotas will remain at July's levels, in which case oil markets will tighten significantly as demand rebounds from last year's Covid-induced plunge.
Crude oil balances are expected to be especially tight, according to the report, while refined product markets are also set to feel the demand/supply crunch.
"Refiners are ramping up quickly to meet higher demand. Our current balances suggest 3Q 2021 could see the largest crude oil stock draw in at least a decade. Product stocks are also set to fall as drivers frustrated by confinement and travel restrictions take to the road en masse. Mobility data show US travel in recent weeks far exceeding pre-Covid levels."
The IEA said it expects Q3 2021 demand to grow by 3.3 million bpd compared to Q2 2021, noting this is more than twice as large as the seasonal increase registered in Q3 2019 and almost three times as much as in Q3 2018.
Gasoline demand is forecast to rise by 1.1 million bpd in Q3 from Q2, followed by jet/kerosene (+830,000 bpd) and gasoil/diesel (+760,000 bpd).
