The oil market was severely shaken by Covid-19 in 2020. THE IEA announces that it should gradually rebalance in 2021. OPEC has also just released its latest production and demand estimates. Also, for the first time since March 2020, the price of a barrel of Brent crude oil has risen above $60. Therefore, control over the price of oil still remains a major geopolitical issue.
Oil market: a gradual recovery in demand
5.8 Mb/d of additional demand in 2021 according to OPEC
The oil market expects to see an increase in demand in 2021 of about 5.8 mb/d according to OPEC, (5.4 according to the IEA; 6.3 mb/d according to Wood Mackenzie). In total, a demand of 96.1 Mb/d is expected (96.4 Mb/d according to the IEA, 96.7 according to Wood Mackenzie), which is 3 to 4 Mb/d less than in 2019.
The IEA, while remaining cautious, justifies its projections thanks to the global vaccine dynamic. This will depend on the logistical capacity of countries to distribute the vaccine. She also shares the concern about the emergence of variants.
OPEC recorded a demand for crude oil in January 2021 that was 300,000 barrels per day higher than in December 2020. Overall, demand stands at 27.5 mb/d of OPEC crude, about 5 mb/d more than the previous year.
In conclusion, the recovery at the beginning of the year should remain fragile and should instead consolidate in the second half of 2021.
OPEC+ production increase
During the health crisis, the price of oil fell sharply. The demand was lower because of the shutdown of the industry and transportation, especially air transport.
Faced with a surplus of stocks, the OPEC+ countries had to make decisions. They had thus committed to reducing their production to support prices.
At the end of 2020, with the recovery of demand, they agreed to increase their cumulative production by 0.5Mb/d as of January. They agreed to meet monthly to reassess the situation. Recently, only Russia and Kazakhstan have received permission to produce more in February and March 2021.
An oil market intertwined with geopolitical issues
But OPEC+, especially Russia, wants to resume production as soon as possible for fear of being outpaced by the United States. According to the IEA, OECD member countries are gradually increasing their supply.
Indeed, with the U.S. shale boom in 2014, the balance of power has been altered. Considered for a long time as the master of the game, OPEC was thus challenged by a new player. To cope, it had concluded agreements with non-member states like Russia, forming OPEC + in 2016.
The oil market, which was severely shaken by the health crisis, is recovering. Despite the halt in 2020, the appetite of the producing powers is still great.