Global oil market fundamentals will likely remain tight over the coming year as oil demand continues to build after having mostly fully recovered to 2019 pre-pandemic levels, Russell Hardy, CEO of commodity trading group Vitol said Nov. 15.
Oil demand for industrial usage has already exceeded 2019 levels while jet fuel demand for aviation continues to lag pre-pandemic levels, meaning global oil demand is “pretty much caught up with 2019,” Hardy told the ADIPEC conference in Abu Dhabi.
“So then when you begin to look forward into 2022, clearly demand is going to carry on increasing,” Hardy said. “Industrial growth is there, are there are some headwinds but people are getting back to more normal patterns in their lives, both their personal transport and their international travel, so we’ve got a reasonably optimistic view of demand for next year.”
At the end of last month, S&P Global Platts Analytics cut its forecasts for global oil demand in 2021 and 2022 due to weaker activity data in Western Europe, the US and Southeast Asia. With oil demand now seen 615,000 b/d lower in the fourth quarter, the annual growth of global oil demand for 2021 is now expected to be 5.1 million b/d.
Platts Analytics now sees gasoline and gasoil/diesel demand returning to December 2019 levels by the end of 2022 while jet demand will remain 8% lower due to lower airline travel.
OPEC+ policy key
On the supply side, Hardy said he sees global crude flows dependent on OPEC+ policy and production discipline as they monitor the market and return the pledged 400,000 b/d of additional oil supply top the market each month.
“Throughout the course of 2022 supply isn’t expected to grow significantly, outside of OPEC, there’s a little bit of growth in the US,” he said. “So the cards remain pretty much in the hands of the OPEC+ group in terms of how much oil they want to add to the market and therefore whether they can keep it in the relatively tight bounds that it’s in at the moment.”
Unhappy with the slow pace of OPEC+ production increases, the US has been considering a release of oil from strategic reserves, an event that has divided analysts on both likelihood and impact.
Hardy said he doesn’t expect any potential release of strategic petroleum reserves by the US government to ease oil prices significantly.
“A US SPR release…should dampen a little bit the front end of the market but it doesn’t change things fundamentally. Next year is still expected to remain in a reasonably tight [oil market] balance,” he said.
Crude oil futures were lower at midday in Europe, as the market responded to rising coronavirus infections and continued talk about a sale of crude from US strategic reserves.
At 1215 GMT, January ICE Brent futures were down $1.26/b at $80.91/b, while the December NYMEX WTI contract fell $1.08/b to $79.70/b.