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IEA expects US crude output to rise due to high oil prices

The International Energy Agency (IEA), in its, maintained global oil demand forecast for CY21 (at 96.3mmbpd), while marginally raised it for CY22 (at 99.7mmbpd). However, expects global refining throughput to increase by almost 3mmbpd during Oct-Dec’21 after autumn maintenance and ease demand-supply tightness witnessed in last couple of months. Further, OECD oil inventory declined 51mmbbl MoM by endSep’21; this is down 250mmbbl vs. 5 year average driven by OPEC+ strong output cuts. On crude supply, IEA expects high oil prices to boost US shale crude production despite operators stick to capital discipline pledges; this is likely to cap oil price rally. US likely to account for 60% of non-OPEC supply growth of 1.9mmbpd in CY22. Further, expects global oil supply to rise by 1.5mmbpd in Nov-Dec’21, after having risen by 1.4mmbp in Oct’21, led by US (adding 0.4mmbpd) and OPEC+ countries.

* CY21 oil demand estimate maintained; marginal increase in CY22 demand estimate: The IEA, in its Nov’21 Oil Market Report, maintains its forecasts for global oil demand to rise by 5.5mmbpd in CY21 (at 96.3mmbpd); however raised forecast for CY22 oil demand growth by 0.1mmbpd to 3.4mmbpd (at 99.7mmbpd). IEA highlighted that global oil demand is strengthening due to robust gasoline consumption and increasing international travel as more countries re-open their borders; however this will be partly offset by new Covid waves in Europe, weaker industrial activity and impact on demand due to higher oil prices.

* OECD oil inventory below 5 year average; refining throughput rising post autumn maintenance: By end-Sep’21, OECD oil inventory declined 51mmbbl MoM to end at 2,762mmbbl; down 250mmbbl vs. 5 year average. Separately, refinery margins rose in Oct’21, driven by exceptionally tight product markets, despite the sharp gains in crude oil prices. However, global refining throughput is set to increase by almost 3mmbpd during Oct-Dec’21 after autumn maintenance. Further, refinery throughputs are expected to stabilise and generally hold flat in 1HCY22 before the seasonal increase in 3QCY22.

* OPEC+ supply grew in Oct’21 in-line with the gradual output hike decision: In Oct’21, OPEC’s output reached 27.4mmbpd (up 240kbpd MoM) led by Saudi Arabia (up 120kbpd at 9.8mmbpd) and Venezuela (up 80kbpd to 690kbpd). Hence, OPEC compliance was at 124% in Oct’21. Russia’s output was up 80kbpd at 9.81mmbpd. OPEC+ compliance was steady at 116% in Oct’21 with Russia’s compliance at 92% and Saudi’s compliance at 102%.

* Oil price rally to be capped as US crude output to rise amidst high oil prices; optimistic on strong recovery in crude supply in 4QCY21 and in CY22: EIA expects US crude output to be at 11.1mmbpd in CY21 (vs. 11.3mmbpd in CY20 and 12.3mmbpd in CY19), but expects it to rise to 11.9mmbpd in CY22. IEA expects high oil prices to boost US shale crude production despite operators stick to capital discipline pledges; this is likely to cap oil price rally. Hence, IEA has raised its forecast for US crude output by 300kbpd for 4QCY21 and by 200kbpd for CY22 and expects US to account for 60% of non-OPEC supply growth of 1.9mmbpd in CY22. IEA expects global oil supply to rise by 1.5mmbpd in Nov-Dec’21, after having risen by 1.4mmbp in Oct’21, led by US (adding 0.4mmbpd) and OPEC+ countries (adding 0.4mmbpd per month as per their gradual output hike decision). Hence, call on OPEC crude is estimated at 27.4mmbpd in CY22 (vs. 27.3mmbpd in CY21).

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