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Oil Market Report Summary - 14 December 2021

Core Content

This report provides an overview of the global oil market dynamics as of December 14, 2021, highlighting trends in demand, supply, refining, stocks, and prices. It also includes regional breakdowns and outlooks for the coming months and years.

Main Points

Global Oil Demand

• 2021 Forecast: Global oil demand is expected to rise by 5.4 mb/d in 2021 and 3.3 mb/d in 2022, returning to pre-pandemic levels of 99.5 mb/d.
• Impact of Covid-19: A new surge in cases is expected to slow, but not halt, the recovery in demand. Jet fuel and kerosene demand is particularly affected due to travel restrictions.
• Revisions: Demand forecasts for both 2021 and 2022 have been revised down by 100 kb/d due to reduced international travel.
• Product-Specific Growth:
  • LPG & Ethane: Expected to rise by 530 kb/d in 2021 and 1 mb/d in 2022.
  • Naphtha: Projected to increase by 1.9 mb/d in 2021 and 0.8 mb/d in 2022.
  • Motor Gasoline: Forecast to grow by 1.9 mb/d in 2021 and 0.8 mb/d in 2022.
  • Jet Fuel & Kerosene: Expected to increase by 530 kb/d in 2021 and 1 mb/d in 2022, but still 1.7 mb/d below pre-Covid levels.
  • Gas/Diesel Oil: Projected to grow by 1.1 mb/d in 2021 and 0.586 mb/d in 2022.
  • Residual Fuel Oil: Forecast to rise by 314 kb/d in 2021 and 186 kb/d in 2022.
  • Other Products: Expected to increase by 284 kb/d in 2021 and 164 kb/d in 2022.
  • Total Products: Projected to grow by 5.367 mb/d in 2021 and 3.341 mb/d in 2022.

Global Oil Supply

• Supply Growth: Global oil production is set to outpace demand from December, led by the US and OPEC+.
• 2021 Growth: World oil output increased by 970 kb/d in November, with the US and OPEC+ driving the rise.
• 2022 Outlook: Non-OPEC+ production is expected to increase by 1.8 mb/d in 2022, while OPEC+ could hit records if cuts are fully unwound, leading to a 6.4 mb/d global supply increase.
• SPR Releases: Strategic petroleum reserves (SPRs) are expected to release up to 70 mb to ease prices, with the US releasing 50 mb in November.

Refining

• Refinery Throughput: Rose by 1.9 mb/d in November, and is expected to increase by 660 kb/d in December, breaking the 80 mb/d threshold.
• 2021 Forecast: Refinery runs are projected to rise by 3.1 mb/d, recovering 42% of the 2020 decline.
• 2022 Outlook: Refinery throughputs are expected to increase by 3.7 mb/d.
• Refinery Margins: Product cracks and refinery margins are affected by changes in demand and supply, with a focus on petrochemical feedstocks.

Stocks

• OECD Industry Stocks: Fell by 21.2 mb in October, reaching 2737 mb, 243 mb below the 2016-2020 average.
• Crude Oil Storage: Short-term floating storage increased by 8.4 mb to 134.5 mb.
• November Stocks: Preliminary data indicate another 23 mb decline.
• Implied Balance: A surplus of 1.7 mb/d in 1Q22 and 2 mb/d in 2Q22 is expected, improving market balances compared to the previous month.

Prices

• Crude Oil Prices: Declined by $15.17/bbl in November, with Brent crude averaging $70.80/bbl in 2021 and $67.60/bbl in 2022.
• Omicron Impact: The emergence of the Omicron variant caused a sharp sell-off, but prices have since recovered to around $75/bbl.
• Forward Curve: Oil prices are expected to be 15% lower in 2022 than in the previous report.

Key Information

• Demand Recovery: Despite the impact of the pandemic, oil demand is on the path to recovery, with 5.4 mb/d increase in 2021 and 3.3 mb/d in 2022.
• Supply Surge: Production is expected to outpace demand starting in December, with non-OPEC+ output rising by 1.8 mb/d in 2022 and OPEC+ potentially increasing supply by 6.4 mb/d.
• Jet Fuel Demand: Still below pre-Covid levels due to travel restrictions, but showing signs of recovery.
• Petrochemical Shift: Demand for petrochemical feedstocks is shifting to Asia, with China accounting for 20% of global light olefin production in 2022.
• SPR Releases: A coordinated release of oil from SPRs in multiple countries is expected to ease prices and replenish inventories.
• Economic Outlook: Global GDP is forecast to grow by 5.7% in 2021 and 4.5% in 2022, supporting continued oil demand growth.
• Regional Outlook:
  • OECD: Demand is expected to recover to pre-pandemic levels by 2022.
  • Non-OECD: Demand is forecast to grow by 1.7 mb/d in 2022, reaching 53.4 mb/d.

Summary Table (Key Demand Projections)

Regional Outlook

• OECD Americas: Demand is projected to rise by 1.7 mb/d in 2021 and 0.88 mb/d in 2022, reducing the gap to pre-Covid levels.
• OECD Europe: Demand is expected to increase by 510 kb/d in 2021 and 540 kb/d in 2022, with a narrowing gap to pre-Covid levels.
• OECD Asia Oceania: Projected to increase by 260 kb/d in 2021 and 200 kb/d in 2022, with demand still below pre-Covid levels.
• Non-OECD: Demand is forecast to grow by 1.7 mb/d in 2022, with some countries affected by travel restrictions.

Conclusion

The oil market is showing signs of improvement as supply is expected to outpace demand from December, and demand is on track to recover to pre-pandemic levels by 2022. However, the recovery is uneven, with jet fuel and kerosene demand still lagging due to travel restrictions. The petrochemical sector is shifting towards Asia, particularly China, as new production capacity comes online. Prices have declined, and SPR releases are expected to provide additional support to the market. Overall, the market is poised for a more comfortable period in 2022.