US EIA sees global oil market balancing in Q3 as supply rises
Global oil supply will match demand for much of the rest of the year as OPEC and US producers increase output, while demand continues to recover from pandemic levels, the US Energy Information Administration said June 8.
EIA raised its outlook for US gasoline demand for a second month in a row, now predicting drivers will consume 9.1 million b/d this summer, given stronger economic indictors.
That would put April-September 2021 demand 1.3 million b/d above summer 2020 levels but still more than 400,000 b/d below pre-pandemic levels seen in summer 2019.
EIA predicts US regular-grade gasoline retail prices to average $2.92/gal this summer, up 85 cents from last year, given higher crude prices and higher wholesale margins. It sees monthly average gasoline prices peaking in June at $3.03/gal.
The latest boost in the gasoline demand forecast comes as US states and cities relax pandemic restrictions and Americans show pent-up demand for travel.
“In the coming months, we expect global oil production to catch up with the increases we’ve seen in demand in 2021,” EIA Acting Administrator Stephen Nalley said in a statement. “US and global oil producers are increasing their production, which should help moderate oil prices that have increased significantly as global economic concerns about the COVID-19 pandemic have begun to ease.”
EIA raised its outlook for 2021 crude oil prices by nearly $3/b from last month to $61.85/b for WTI and $65.19/b for Brent. However, it trimmed its 2022 average price forecast by 25 cents from last month to $56.74/b for WTI and $60.49/b for Brent.
EIA expects US oil production to average 11.08 million b/d in 2021, up 60,000 b/d from last month’s outlook, and 11.79 million b/d in 2022, down 50,000 b/d.
WTI prices above $60/b will spur US producers to drill and complete enough wells to raise 2022 production from 2021 levels, EIA said.
The report predicts OPEC crude oil production will rise to 28 million b/d in the third quarter, up from 25 million b/d in April.
“Our expectation of rising OPEC production is primarily based on our assumption that OPEC will raise production by about 1 million b/d in both June and in July in response to rising global oil demand and seasonal increases in oil consumption for power generation for some OPEC members,” EIA said, adding that it also expects higher Iranian production.
The US and Iran are expected to enter a sixth round of indirect talks in Vienna this week aimed at reviving the Joint Comprehensive Plan of Action and removing US sanctions on Iran’s oil sector.
S&P Global Platts Analytics still expects the sides to reach a deal in the coming months, with the Biden administration removing sanctions by September, which would allow Iran to boost crude and condensate exports to 1.5 million b/d by December, from 600,000 b/d in May.
EIA kept its predictions for global oil demand growth largely steady at 5.4 million b/d in 2021 and 3.64 million b/d in 2022. That would mean global demand remains about 300,000 b/d below 2019 levels this year, before reaching pre-pandemic levels next year.
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