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New mobility restrictions in Asia to fight the Delta variant are set to slow global oil demand growth in the second half of 2021, the International Energy Agency (IEA) said on Thursday, although it left its full-year demand growth estimates largely unchanged.
The IEA sees global oil demand growth rising by 5.3 million bpd to an average of 96.2 million bpd in 2021 and by another 3.2 million bpd in 2022, the agency said in its closely-watched Oil Market Report published on Thursday.
“Growth for the second half of 2021 has been downgraded more sharply, as new Covid-19 restrictions imposed in several major oil consuming countries, particularly in Asia, look set to reduce mobility and oil use,” the IEA said.
At the end of the first half of 2021, in June, global oil demand jumped by as much as 3.8 million bpd compared to May, led by increased travel in North America and Europe, the IEA said.
“However, demand growth abruptly reversed course in July and the outlook for the remainder of 2021 has been downgraded due to the worsening progression of the pandemic and revisions to historical data,” the Paris-based agency noted.
July also saw a slowdown in the recovery of global refinery activity, “as new waves of Covid-19 cut into fuel demand while margins remained under pressure,” according to the IEA.
While demand growth is set to slow down, supply is rising fast.
“The immediate boost from OPEC+ is colliding with slower demand growth and higher output from outside the alliance, stamping out lingering suggestions of a near-term supply crunch or super cycle,” the IEA noted.
Even after the deal from last month, OPEC+ is estimated to pump about 200,000 bpd below the call on its crude in Q4 2021, compared with a deficit of up to 2 million bpd expected before the July agreement.
“But the scale could tilt back to surplus in 2022 if OPEC+ continues to undo its cuts and producers not taking part in the deal ramp up in response to higher prices,” said the IEA.
Supply from outside the OPEC+ group is expected to grow by 1.7 million bpd in 2022, of which the U.S. will account for almost 60 percent.
“OPEC+ can still pause, continue or even reverse its curbs as required by the market and it looks unlikely that the unwinding of cuts will continue on a linear trajectory in 2022,” the agency said.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.