On Wednesday, Brent spot prices rose from $61.4 to $61.64 a barrel, and WTI prices – from $59.34 to 59.77 a barrel, according to Refinitiv data.
Oil prices were supported by a reduction in U.S. commercial oil stocks – by 2.62 million barrels in the week ending 2nd April, according to data from the American Petroleum Institute (API) – considering that the market had anticipated a reduction of only 1.33 million barrels.
Optimism was further bolstered by an improved forecast from the international Monetary Fund of world-wide 2021 GDP growth from 5.5 % in January to 6.0 % in April.
Also corrected upward was a forecast of world-wide demand for oil and liquid fuels– issued by the U.S. Department of Energy’s Energy information Agency – in March, the EIA forecast a rise in demand of 5.3 million bpd, while in April that figure was revised upward to 5.5 million bpd.
For world oil markets, the decisive factor was the recovery of the world economy and the corresponding rise in oil demand.
This is quite clearly seen in the United States – with a projected rise in GDP of 6.4 % (against a decline of 3.5 % in 2020), demand for petrol, according to EIA, will climb by 8 % (to 8.64 million bpd) and demand for aviation fuel by 26 % (to 1.36 million bpd).
Similar rises would be expected for other countries and regions. In Europe, according to the forecast by the International Energy Agency (IEA), demand for petrol and aviation fuel in 2021 will increase by 5 % (to 2.1 million bpd) and 13 % (to 0.9 million bpd) respectively. The figures for China would be 3 % (to 3.5 million bpd) and 29 % (to 0.9 million bpd) and in East Asia as a whole – 6 % (to 7.5 million bpd) and 22 % (to 2.2 million bpd).
These are the likely considerations behind market optimism, casting into the background risks in terms of supply. All the more so as signatories to the OPEC+ deal have been conservative in easing production cutback quotas – to be lowered to 5.8 million bpd half a year later than had initially been set down in the accord (July instead of January).
In the second half the year the dynamics of supply may well have a greater effect.
This applies in terms of rising production levels of OPEC countries (from 25.1 million bpd and 25.8 million bpd in the first and second quarters to 27.9 million barrels a day in the second half of the year), according to the EIA. And it applies equally to the elimination of the effect of a low base or starting point which, taking account of the deepest falls in demand in the second half of 2020, will gradually be reduced to zero.