Crude oil spot prices made a come-back in gains, after a slump in April 2021, rising about 6 percent on average month-on-month basis. This is buoyed by the stronger physical oil market fundamentals.

Specifically, oil refineries in the Asia Pacific and Europe showed higher buying interests on the expectation of further recovery of oil demand as summer driving season approached. Decline in crude stock in some jurisdictions such as the US lent support to the rise in prices as well as continued recovery in refinery runs.

The OPEC Reference Basket (ORB) value rose strongly increasing by US$3.67, or 5.8 percent on a month-on-month basis. This, therefore recorded US$66.91/b, its highest monthly average since May 2019. Compared to that of 2020, the ORB was up 56.8 percent, from US$39.65/b to an average of US$62.16/b this year.

Moreover, prices of crude oil futures rebounded in May after market agents- traders turned more optimistic about a further recovery in oil demand and accelerating global oil market rebalancing and oil destocking.

Also, ICE Brent increased by 4.6 percent to US$2.98, to average $68.31/b. The other crude oil futures- NYMEX WTI and Brent-WTI increased alongside except Brent-WTI. NYMEX WTI increased to US$3.45 or 5.6 percent.

Investors also showed optimism, and bolstered by accelerating Covid-19 vaccination in advanced countries alongside the ease of mobility restrictions.

Demand for global oil

On the whole, global oil demand will average 90.6 mb/d, the report hints. OPEC forecasts for world oil demand growth will not changed at 6.0 mb/d, with total oil demand at 96.58 mb/d. OECD demand is revised slightly lower on an annual basis. Thus, reflecting lower-than-expected data from OECD Americas and Europe in Q1 2021.

However, initial data for April in both regions, as well as easing restriction measures and border openings, encouraged an upward revision to Q2 2021 data. This offset most of the Q1 2021 downward revision.

Supply for global oil

The monthly report saw non-OPEC liquids supply revised up by 0.1 mb/d from last month’s assessment. This led to a current forecast growth by 0.8 mb/d to average 63.7 mb/d. This is mainly due to a faster-than-expected recovery in US liquids production of 2.5 mb/d in March.

Additionally, the supply forecast for Norway, China, and Indonesia saw a downward revision, while the supply forecast in the UK, Brazil and Colombia saw a downward revision, OPEC reveals.

The main drivers for 2021 supply growth are anticipated to be Canada, Brazil, China and Norway, while US liquids supply is now expected to only grow by a marginal 0.03 mb/d year-on-year.

US crude oil will decline year-on-year by 0.1 mb/d to 11.2 mb/d, the report reveals. OPEC forecast Natural Gas Liquids (NGLs) to grow by 0.1 mb/d year-on-year in 2021 to average 5.2 mb/d. This follows an estimated contraction of 0.2 mb/d in 2020.

OPEC crude oil production in May increased month-on-month by 0.39 mb/d, to average 25.46 mb/d, according to available secondary sources to date obtained by OPEC.