(Montel) Opec has revised down its global oil demand outlook for 2021, largely due to lower-than-expected consumption levels in the first three quarters of the year, despite a squeeze on energy supplies.
“Despite positive assumptions on oil demand going into the final quarter of the year, supported by seasonal petrochemical and heating fuel demand as well as the potential of switching from natural gas to oil in the power generation sector, the downward revision mainly takes into account actual data,” Opec said.
It pointed out that soaring natural gas prices – which reached record-high levels, particularly in Europe during September – have triggered a growing interest in switching from natural gas to liquid fuels, as energy companies and industrial users attempt to drive down costs.
The gas price rally was triggered by lower-than-average storage levels and fears of potential shortages should winter temperatures be colder than usual.
“Should this trend continue, fuels such as fuel oil, diesel, and naphtha could see support, driven by higher demand from power generation, refining and petrochemical use,” Opec said.
“On the other hand, record-high natural gas prices have pushed electricity costs and, consequently, refining operational costs higher. This could weigh on refinery intakes and industrial production and partially offset the upside potential.”
In the oil futures market, prices have been see-sawing since Monday when the Brent and WTI benchmarks reached their highest levels since 2018 and 2014 – at USD 83.47/bbl and USD 79.76/bbl on Ice Futures, respectively.
The front-month contract for Brent crude North Sea oil traded last down USD 0.57 at USD 82.85/bbl on Ice Futures, while the WTI equivalent was USD 0.51 lower at USD 80.13/bbl.
Maintains 2022 demand outlook
Opec kept its world oil demand outlook for 2022 unchanged from last month at a 4.2m bbl/day increase, with demand seen reaching 100.8m bbl/day for the year.
“For 2022, the oil demand outlook takes into consideration an increase of 4.2% in economic activity, with Covid-19 pandemic-related risks well-managed due to higher vaccination rates and better treatment. In terms of products, gasoline and diesel are estimated to increase the most, supported by an ongoing recovery in mobility and improving industrial activity,” the group said.
Demand for Opec crude oil alone would reach 28.8m bbl/day in 2022, around 1m bbl/day higher than in 2021, it said.
In September, Opec crude oil production rose by 0.49m bbl/day from the previous month to average 27.33m bbl/day, the report said, citing available secondary sources.
Earlier this month, Opec and its Russia-led allies agreed to stick with a plan formulated in the summer to gradually boost oil production by 0.4m bbl/day each month.
They aim to finish phasing out their record production cuts taken last year to counter the demand destruction caused by the pandemic and related lockdowns.
Meanwhile, the group estimated non-Opec liquids production would rise from an average 63.64m bbl/day in 2021 to 66.66m bbl/day in 2022, compared with 62.98m bbl/day in 2020.
“The 2021 oil supply forecast primarily sees growth in Canada, Russia, China, Brazil and Norway, while output is projected to decline in the UK, Colombia, Indonesia and Egypt,” Opec said.
The main drivers of liquids supply growth next year would be Russia and the US, followed by Brazil, Norway, Canada, Kazakhstan and Guyana. “Nevertheless, uncertainty regarding the financial and operational aspects of US production remains high.”