20210831-IEA-Oil_Market_Report_-_September_2021_87页_2mb

Oil Market Report Summary - 14 September 2021

Core Content

This report outlines the state of the global oil market in late 2021, focusing on demand, supply, refining activity, and stock levels. It highlights the impact of the resurgence of the Delta variant of Covid-19, the effects of Hurricane Ida, and the role of strategic oil reserves in mitigating supply and demand imbalances.

Main Points

• Global Oil Demand:

  • Global oil demand declined for three consecutive months due to a resurgence of Covid-19 cases in Asia.
  • The demand forecast for August and September was revised down by nearly 600 kb/d.
  • A sharp rebound of 1.6 mb/d is expected in October, with continued growth until the end of the year.
  • Annual demand growth for 2021 is estimated at 5.2 mb/d, and for 2022 at 3.2 mb/d.

• World Oil Supply:

  • Supply fell by $540\mathrm{kb / d}$ m-o-m in August to 96.1 mb/d.
  • Hurricane Ida caused a significant supply loss of 1.7 mb/d in late August, with potential losses approaching 30 mb.
  • The supply is expected to stabilize in September, with OPEC+ unwinding cuts and resolving outages.

• Refining Activity:

  • Refinery activity in the US Gulf Coast dropped sharply due to the impact of Hurricane Ida.
  • The refining rebound in September was faster than the supply recovery, leading to reliance on strategic reserves.
  • Refinery outages in the Gulf Coast are expected to reduce gasoline output by 200 kb/d and diesel by 140 kb/d in September.

• Stock Levels:

  • OECD total industry stocks fell by 34.4 mb in July and stood 185.7 mb below the 2016-2020 average.
  • Crude and refined product inventories are at lower levels than the pre-Covid average, offering limited cushion against further disruptions.
  • The US Strategic Petroleum Reserve (SPR) is being used to offset supply losses, with 3.3 mb of crude oil released in August.

• Prices:

  • Crude prices fell in August, trading in a $8-9/bbl range, with the forward price curve flattening.
  • North Sea Dated prices dropped by $4.24/bbl to $70.75/bbl, and WTI at Cushing fell by $4.73/bbl to $67.73/bbl.
  • Prices rebounded slightly in early September due to supply losses from Hurricane Ida.

• Regional Impact:

  • OECD Regions:
    • Demand growth in OECD countries was strong in Europe and North America but stagnant in Asia and Oceania.
    • US and Mexico showed increased demand in 3Q21, while Canada and Chile had small declines.
  • Non-OECD Regions:
    • Asia, particularly China, faced significant demand declines due to mobility restrictions.
    • China's crude demand fell by 890 kb/d in August due to the Delta variant resurgence.
    • China is expected to sell from its strategic reserves to stabilize prices and inflation.

• Economic Fundamentals:

  • World GDP growth is projected at 5.9% in 2021 and 4.9% in 2022, with some downward revisions due to new waves of the pandemic.
  • US GDP growth is forecast at 6% for 2021 and 4.8% for 2022, despite the impact of the Delta variant.
  • Europe's manufacturing PMI remained strong, with Germany and the UK showing full vaccination rates and economic resilience.
  • Asia, particularly Japan and Australia, saw a slowdown in demand due to mobility restrictions and a new wave of the virus.

Key Information

• Hurricane Ida:

  • Caused a 1.7 mb/d shutdown in the US Gulf Coast in late August, with potential losses reaching 30 mb.
  • Delayed restarts of offshore production and refineries have led to significant inventory draws.
  • The storm's impact is expected to persist into September, with supply recovery anticipated in October.

• Strategic Reserves:

  • The US SPR is being used to offset supply losses, with 3.3 mb of crude oil released in August.
  • China is also tapping into its strategic reserves to stabilize domestic prices.

• Refinery Output:

  • US Gulf Coast refining capacity was reduced by 700 kb/d in late August, with three refineries still offline.
  • Refinery activity is expected to recover in the coming weeks, though not fully by the end of the quarter.

• Stock Implications:

  • Low crude and product inventories are a concern, with strategic reserves playing a critical role in maintaining market stability.
  • OECD total oil stocks are 185.7 mb below the five-year average, with further declines expected in August.

• Market Outlook:

  • The market is expected to move closer to balance in October if OPEC+ continues to unwind production cuts.
  • Supply will not be sufficient to replenish stocks until early 2022.
  • Oil prices are expected to stabilize as supply and demand dynamics improve.