US West Texas Intermediate and international benchmark Brent crude oil futures are trading slightly lower after withdrawing most of their earlier losses in Thursday’s mid-session. There was no selling pressure even when the market was still hovering near its high of 18 March.
Despite this week’s draw of US crude oil, the concern may be expressed over the increasing supply globally. US production is expected to increase now that prices have stabilized near pre-epidemic levels and Iran may start releasing more supplies. Earlier in the month, OPEC and its partners began gradually increasing production in May, June and July.
Despite supply concerns, the market is well supported by a number of factors such as a favourable outlook for the global economy, greater demand for risky assets, and a weaker US dollar.
Support is also coming from the news that the International Energy Agency (IEA) and OPEC estimated their global oil demand growth to be 5.7 million barrels per day (BPD) and 5.95 million bpd respectively for 2021 this week.
IEA UPS Oil Demand Forecast Vaccination Brighton Outlook
The International Oil Agency (EIA) said on Wednesday that vaccine rollouts are brightening the outlook for global oil demand, although growing cases in some major oil-consuming countries are fragile.
“Fundamentals certainly look strong,” the IEA said in its monthly report.
“The massive overhang of global oil inventions that were created during last year’s COVID-19 demand shock is being worked out, vaccine campaigns are booming and the global economy is in a better position.”
Citing rising cases in Europe, Brazil and the United States, the Paris-based watchdog said it worried about new waves of virus progress.
Nevertheless, the IEA predicted global oil demand and was determined to rebalance supply in the second half of the year and producers may need to pump 2 million barrels more per day to meet expected demand is.
OPEC and allies such as Russia, a group known as OPEC +, will likely prove their output capable of demanding whether the virus is named or not, the IEA said.
“A rapid increase in the monthly calibration of blocks of supply or adjusting output low can facilitate meeting increased demand.
The IEA said that commercial oil stored in OECD countries fell for the seventh consecutive month in February, leading to an increase in demand and an increase in imports in the near future.
Least developed countries face a tough climb to exit the demand crater built by COVID-19, the IEA warned the differences between countries with quick access to the vaccine and those without which become more apparent.
The IEA stated, “Some emerging countries with low access are in a more difficult position with new COVID waves slowing economic activity and mobility.”
“Currently the situation is rapidly deteriorating among some large non-QECD oil consumers (Brazil, Iran and India).”