“Oil’s sharp rally to near $70 a barrel has spurred talk of a new supercycle and a looming supply shortfall. Our data and analysis suggest otherwise,” the IEA said in its monthly report.
“For a start, oil inventories still look ample compared with historical levels despite a steady decline … On top of the stock cushion, a hefty amount of spare production capacity has built up as a result of OPEC+ supply curbs,” it said.
Graphic: OECD Industry stocks –
Graphic: OPEC+ spare production capacity –
The Organization of the Petroleum Exporting Countries and its allies, a group dubbed OPEC+, largely kept limits on production this month, galvanising the market and causing some investors to predict a supercycle – a large, multi-year price rise.
“The prospect of stronger demand and continued OPEC+ production restraint point to a sharp decline in inventories during the second half of the year,” the Paris-based energy watchdog said.
“For now, however, there is more than enough oil in tanks and under the ground to keep global oil markets adequately supplied.”
Graphic: Oil supply response m-o-m change –
A cold snap in recent months helped boost consumption and global demand this year is set to recover around 60% of the volume lost during the depths of the COVID-19 pandemic in 2020.
Changes to work and travel patterns wrought by the COVID-19 pandemic as well as governments’ low-carbon targets have long-term implications for the demand outlook, the IEA said.
Graphic: IEA world oil demand outlook –
“Rapid changes in behaviour from the pandemic and a stronger drive by governments towards a low-carbon future have caused a dramatic downward shift in expectations for oil demand over the next six years,” the IEA said in its Oil 2021 five-year outlook, another report published on Wednesday.
The Paris-based watchdog lowered its oil demand forecast for 2025 by 2.5 million bpd from its prediction last year. Still, oil demand is set to return to pre-crisis 2019 levels by 2023, it said.