OIES Oil Monthly – Issue 6

The new issue of OIES Oil Monthly, including our latest short-term oil market outlook, is now available.

This month’s featured In Focus piece focuses on China’s crackdown on the Shandong teapots through the imposition of a consumption tax on blendstocks and tighter scrutiny over import quota trading. The In Focus argues that the crackdown bodes well for the state-owned refiners and since it will take as much as 1.5 mb/d of products off the domestic markets, state-owned refiners will need to import more crude oil while exporting less products. But in the process of the state-owned refineries regaining market share, both international crude flows and domestic product balances are about to be shaken up.

Our reference forecast for Brent is upgraded to $68.7/b in 2021 and $68.9/b in 2022. Oil prices are projected to remain in the $70/b and $80/b range for the rest of 2021 as global oil demand heads towards a strong second half of the year. But absent any upside surprises, prices are seen retreating to the mid-to-high $60s in 2022. Global oil demand growth in 2021 stands at a solid 5.7 mb/d with the US, Europe and China taking over the growth baton, followed by 3.2 mb/d in 2022. Global supply growth in 2021 is upgraded by 2.1 mb/d and 6.3 mb/d in 2022 on the assumption that OPEC+ gradually eases its cut and Iran ramps up production by Q2 2022. Non-OPEC supply growth remains modest in 2021 before gaining some momentum in 2022 with the US leading the growth. Deficits will persist in 2021 and average to 0.7 mb/d for the year as a whole, but with ample supplies returning to the market in 2022, market balances are expected to flip into surpluses anew by 2.4 mb/d. This highlights the importance of OPEC+ balancing role, as supply management will remain crucial well into 2022.