OPEC Raises Demand Forecast for Its Crude as U.S. Supply Slips
(Bloomberg) -- OPEC modestly increased forecasts for the amount of crude it will need to produce as output from the U.S. -- for years the group’s biggest rival -- declines again.
The Organization of Petroleum Exporting Countries boosted estimates for the call on its output this year by 230,000 barrels a day, to an average of 27.65 million a day, according to a monthly report.
Projections for American supplies in 2021 tipped from modest growth to a slight decline, largely because of disruption caused by winter storms in Texas. OPEC expects that the current blow to Indian demand from flaring virus infections will be offset by a recovery in the U.S. and elsewhere.
The analysis should provide some reassurance for the cartel and its allies, who are gradually restoring some of the oil output they halted when the coronavirus emerged last year.
The 23-nation OPEC+ coalition led by Saudi Arabia and Russia has begun the first of three monthly production increases that will revive just over 2 million barrels a day by the end of July. Oil markets are weathering the plans comfortably, with prices holding near $68 a barrel in London.
OPEC’s report indicates that by the time the coalition has implemented the planned increases, demand for the cartel’s crude will be even higher than its output -- by about 2 million barrels a day. The alliance could thus choose to either restore more supplies, or drain world inventories further.
The cartel trimmed projections for supplies from its rivals this year by 230,000 barrels a day. Non-OPEC output overall will still rise 700,000 barrels a day in 2021 to 63.6 million a day, recovering from last year’s rout.
The U.S., which last month had been anticipated to manage a modest recovery of 160,000 barrels a day in 2021 following last year’s slump, is now seen sliding by 70,000 barrels a day. Freezing storms knocked out over 2 million barrels of U.S. output in February.
OPEC kept estimates for global oil demand in 2021 unchanged, as the hit suffered during the first half of the year is offset by a recovery in the second half. World consumption is on track to rebound by 6 million barrels a day this year, to average 96.5 million a day.
“Positive transportation fuel data from the U.S., and acceleration in vaccination programs in many regions provides further optimism in the second half,” the report by OPEC’s Vienna-based research department said.
The group and its partners are next due to meet for a review of their production plans on June 1.
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