Slow Rate of Emerging-Market Vaccinations Is Dragging Oil-Demand Rebound, IEA Says
June 11 2021 - 4:15AM
Dow Jones News
By David Hodari
The world's appetite for crude oil will return to its
pre-pandemic highs by the end of next year, but poor coronavirus
vaccination rates in emerging economies are pushing the pandemic's
end date further away, the International Energy Agency said
Friday.
In its closely-scrutinized market report, the energy watchdog
said that while it expects global oil demand in 2022's final
quarter to hit 100.6 million barrels for the first time since late
2019, it was also slashing its forecast for resurgent demand in the
second half of this year.
The IEA said the world will want approximately 300,000 barrels a
day of crude less than previously thought in this year's final two
quarters because of slow vaccination campaigns in poorer countries
such as Brazil, India, and Malaysia.
"The uneven distribution of vaccines at the global level means
that this situation could persist in the second half of 2021 and
into 2022, unless access to vaccines improves," the IEA said. The
report comes the day after a The Wall Street Journal analysis
showed that more people have died from Covid-19 already this year
than in all of 2020 and that the pandemic is far from over for much
of the world.
At the same time, the world has finally burned off the enormous
glut of oil it built up when pandemic restrictions grounded flights
and shut factories and restaurants last spring. After inventories
threatened to exceed storage in the first half of 2020,
developed-world oil stocks fell in May to below their pre-pandemic
five-year average for the first time in more than a year, hitting
their lowest since February 2020, the IEA said.
That estimate from the IEA came the day after a report from the
Organization for the Petroleum Exporting Countries said that the
five-year average wouldn't be reached until the second half of the
year.
Oil prices wavered early Friday, with Brent crude oil--the
global benchmark--down 0.1% at $72.47 a barrel. West Texas
Intermediate futures, the U.S. benchmark, were also down 0.1% at
$70.24 a barrel. Both benchmarks hit fresh multiyear highs on
Wednesday, with optimism about resurgent demand having held Brent
prices above $70 a barrel in recent weeks.
The rebound in consumption--much of which comes from rising
demand for gasoline and jet fuel as the global transportation
sector continues its recovery--will allow oil producers to turn on
the taps next year and raise their output, the Paris-based
organization said.
After U.S. output declined during 2020 and 2021, American
producers are on course to raise production by 900,000 barrels a
day next year, with other non-OPEC producers adding a further
700,000 barrels a day to the market.
While that will leave room for OPEC and its allies to raise
production by a further 1.4 million barrels a day above its target
level for the period July 2021 to March 2022, it would still leave
the alliance's output more than 2 million barrels a day below its
2019 average, the IEA said.
Still, the status of Iranian supply represents an unknown for
global producers. President Biden's administration on Thursday
lifted sanctions on three former Iranian officials and several
energy companies amid stalled negotiations to revive the 2015
multilateral Iran nuclear agreement.
That could be a sign of things to come. Should the parties reach
an agreement in the coming weeks, Iranian production could ramp up
to full capacity of 3.8 million barrels a day--up 1.4 million
barrels from current levels--by the end of next year, the report
added.
While expectations of rising supply and the return of oil demand
next year to 2019 levels represent a return to pre-pandemic
normality for the global economy, the IEA also pointed out that its
forecasts stood in stark contrast to its estimates that governments
and businesses are still far from on track to hitting net-zero
emissions by mid-century.
That target is crucial in limiting the rise in global
temperatures to 1.5 degrees Celsius above preindustrial levels--a
goal laid out in the 2015 Paris climate agreement.
Write to David Hodari at david.hodari@wsj.com
(END) Dow Jones Newswires
June 11, 2021 04:14 ET (08:14 GMT)
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