Riyadh – Mubasher: Oil demand is forecast to increase by 2% or 1.5 million barrels per day (bpd) during the fourth quarter (Q4) of 2021 on a quarterly basis, according to a report by Jadwa Investment.
OPEC data showed that oil demand has risen by 3% quarter-on-quarter (QoQ) to 98.3 million bpd in Q3-21, given that the ongoing roll-out of COVID-19 vaccines worldwide eased restrictions in mobility and helped lift transportation fuel to near pre-pandemic levels.
The majority of the expected Q4-21 oil demand would be covered by OPEC+’s stated 400,000 bpd monthly rise, according to the report.
Jadwa noted: “That said, further gas market developments could continue to spillover into higher oil demand.”
As for oil prices, high gas prices are expected to continue to Q1-22. According to the International Energy Agency’s (IEA) Gas Market Report, Dutch TTF prices are foreseen averaging $24 per million British thermal unit (mmBtu) (equivalent to $139 per boe) in Q4-21.
Some estimates suggested that the recent climb in gas prices added around 500,000 bpd of oil demand for use in power generation.
“A continued recovery in the global economy, in-line with higher vaccination rates, should push oil demand to all time record highs by the end of 2022, to 102.9 million bpd, circa 4.6 million bpd higher than Q3-21 demand of 98.3 million bpd,” Jadwa cited OPEC data.
The US agency data indicated that US oil production is virtually unchanged at 11 million bpd since the turn of the year, with only 2% higher on an annual basis in Q3-21.
The EIA expected US oil output to be 7% lower at the end of 2022, when compared to peak 2019 output.
Jadwa added: “The longer that oil prices remain elevated, the higher the likelihood of larger quantities of US shale oil hitting the market.”
Brent oil meanwhile is currently trading at around $85 per barrel (pb). It’s expected to trend higher in near term once gas-to-liquid substitution accelerates during the winter months.
Oil prices therefore could be pushed towards $100 pb, which could move OPEC+ to increase oil output beyond current stated levels to stabilise oil markets and trigger a moderate rise in shale oil production in the near term.
Jadwa added: “Whilst we acknowledge that there is an upside risk to our full year 2021 Brent oil forecast of $67 pb, we have kept our full year 2022 Brent oil forecast unchanged at 65 pb, for now.”
