A decline of 14.2 million barrels – to 3.023 billion, a level still 63.2 million barrels higher than the average figure over five years, was triggered by the recovery of global oil demand. The OECD made an adjustment in its forecast for demand in 2021 from 5.4 million barrels per day (bpd) to 5.5 million bpd in March.
The IEA is also forecasting an increase in terms of supply: that figure declined in 2020 by 1.3 million bpd. Production by all countries outside the OPEC+ agreement is to rise by 700,000 bpd by the end of 2021.
It is noteworthy that production did fall in February – in both Saudi Arabia, keeping to its pledges to reduce its supply voluntarily by 1 million bpd and throughout the rest of the world (by 2 million bpd). This is partly because of the severely cold weather in Texas, which temporarily hit production in the Permian Basin – key to the U.S. shale industry.
That triggered a price rise – at its highest level since May 2019. The IEA expects prices to stabilise, given the considerable surplus of production capacity in OPEC countries (7.7 million bpd according to February figures) and that is likely to push member states to increase their production.
The U.S. Energy Information Administration (EIA) also anticipates a stabilisation of prices. It forecasts a production increase by OPEC countries from 25.3 million bd in April to 26.6 million bpd in May and 27.9 million bpd in the second half of the year.
Along with a stabilisation of U.S. production (11 million bpd in March against 9.7 million bpd during the coldest period in February), this will affect the level of commercial stocks, which are predicted to decline during the first half of 2021 by 1.2 million bpd. Their level is expected to rise by 0.4 million bpd in the second half of the year.
As a result, the forecast average price of a barrel of Brent over the course of the year ($60.70) will in fact be lower than in February ($62) but higher than in 2020 ($41.70). The European central Bank issued a similar forecast of $59.30 per barrel in March.
This price level will almost certainly reflect the overall state of oil markets on which compensation – or making up of ground – for last year’s collapse In demand (60 % according to the IEA forecast) will be offset by a decline in the surplus of production capacity which reached unprecedented levels given the pandemic conditions.