Following the release of the International Energy Agency’s (IEA) closely-watched Oil Market Report, the price of Crude climbed to $66 a barrel and Brent Crude surpassed the $69 per barrel mark at WTI trading.
Prices jumped even though the agency revised down its full-year 2021 oil demand growth forecast by 270,000 barrels per day (bpd) from last month’s assessment, expecting now demand to rise by 5.4 million bpd. The downward revision was due to weaker consumption in Europe and North America in the first quarter and expectations of 630,000 bpd lower demand in the second quarter due to India’s COVID crisis, according to The Nation.
It added that the global oil glut that was hanging over the market for more than a year is now gone, the agency said.
“After nearly a year of robust supply restraint from OPEC+, bloated world oil inventories that built up during last year’s COVID-19 demand shock have returned to more normal levels,” the IEA said in its report.
The market looks oversupplied in May, but stock draws are set to resume as early as June and accelerate later this year. Under the current OPEC+ policy, oil supply will not catch up fast enough, with a jump in demand expected in the second half, according to the IEA. As vaccination rates rise and mobility restrictions ease, global oil demand is set to soar from 93.1 million bpd in the first quarter of 2021 to 99.6 million bpd by the end of the year.
“The widening supply and demand gap paves the way for a further easing of OPEC+ supply cuts or even sharper stock draws,” the IEA said.
The agency’s assessment for oil demand is similar to that of OPEC, which expressed optimism in its monthly report on Tuesday that accelerating vaccination programs and rising fuel demand would raise global oil demand by 5.95 million bpd this year despite the COVID crisis in India.
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