Crude oil prices have shored up to $64.56/b in March 2021, indicating the highest rise on a month-on-month basis since January 2020.
According to the Organization of the Petroleum Exporting countries (OPEC), this reflects an increase of 5.7% on a month-on-month basis. By this, crude oil prices have risen for the fifth-consecutive month in March, resulting from better oil market indicators.
After experiencing its worst run in 2020, oil prices are improving. For the first three months of 2021, oil prices increased by 17.2% to average $60.22/b. Crude oil futures prices were higher in March 2021 improving from February’s gains.
Global Oil demand
Following this bullish run in oil prices, global oil demand is also taking shape. The cartel forecasts oil demand growth to increase by about 6.0mb/d y-o-y, reflecting an upward change by a 0.1 mb/d from March’s forecast.
Moreover, the bulk of consumption growth is likely to occur in Q22021 and Q32021, with global demand growth projected at 12.0 mb/d year-on-year and 6.5 mb/d year-on-year.
OPEC estimates that gasoline will be the major driver for oil demand recovery as the summer driving season unfolds. Also, diesel will also provide support, on the back of economic rebound stemming from the implementation of fiscal stimulus programmes.
According to the OPEC, global oil demand will average about 96.5 mb/d in 2021.
For the second half of 2021, the cartel projects that oil demand will grow in line with a stronger-than-expected economic rebound. Essentially, the major drivers of this increasing growth curve include fiscal stimulus programmes, accelerated vaccination rollouts and ease in restrictions.
However, oil demand adjusted downwards in the first half of 2021, mainly taking into account the recent developments related to COVID-19 measures in OECD countries. Other considerations included the sluggish demand for oil in non-OECD countries.
Global Oil Supply
Oil Supply was not spared last year, as it contracted by 2.5 mb/d year-on-year among non-OPEC countries. Albeit, the report highlights that the majority of decline emanated from Russia and the US.
Nonetheless, the commodity is now forecast to grow by 0.9mb/d, reflecting an average of 63.8 mb/d. That said, higher prices building up in the US could potentially lead to a higher production level, the report indicates. However, this growth trajectory is likely to remain unchanged at 0.16 mb/d year-on-year.
Countries likely to experience growth in the supply of oil are Canada, Norway and Brazil, the report reveals. OPEC forecasts Natural Gas Liquids (NGLs) to grow by around 0.1 mb/d year-on-year in 2021 to average 5.2 mb/d.
According to data from secondary sources, the OPEC crude oil production increased by 0.20 mb/d, month-on -month in March 2021 to average 25.04 mb/d, the report notes.
Nevertheless, uncertainties that still linger regarding the recovery process require careful monitoring of market developments.
The report further notes that: “The joint efforts of the OPEC and non-OPEC countries participating in the Declaration of Operation continue to contribute to market stability to ensure efficient, economic and secure supplies of oil to consumers, with a fair return on invested capital.“