Opec forecasts a recovery in the oil market and revises demand growth upward

A sticker reads crude oil on the side of a storage tank in the Permian Basin in Mentone, Texas. Opec said the higher prices seen in the crude commodity markets could prompt a higher level of US producShow more

Opec revised oil demand growth upwards by 100,000 barrels per day for 2021, on the back of a stronger economic rebound supported by stimulus programmes in the world's largest economies.

Global oil demand is expected to rise by 6 million bpd this year, reaching 96.5 million bpd.

Stronger demand in the second half of the year from Organisation for Economic Co-operation and Development, which comprises some of the world's most developed nations, will help support crude demand recovery.

Oil demand is adjusted lower in the first half of 2021 as a result of a recent developments related to Covid-19 measures in OECD Europe and sluggish first quarter oil demand from the non-OECD region, Opec said in its monthly oil market report.

Rising infections have forced Europe's largest economies Germany and France into lockdowns to contain the spread of Covid-19.

Concerns over adverse side effects of some vaccines have complicated the continent's already slow distribution.

The more optimistic view about demand recovery follows the decision by Opec+, the super group led by Saudi Arabia and non-member Russia, to increase output over the next few months.

The producers will now bring back the 2 million bpd that was deferred at the start of the year due to uncertainty over global economic recovery.

The group will increase output by 350,000 bpd in May and June and will add 450,000 bpd in July.

Saudi Arabia, which had supported the group's restrictions by volunteering to cut 1 million bpd until April, will phase out the curbs from May onwards.

Riyadh will restore 250,000 bpd in May, 350,000 bpd in June and 400,000 bpd in July.

Despite its expectations for growth in the second half, Opec cautioned that risks "remain high during 2021", and are subject to the spread of the coronavirus and the pace of reaching herd immunity in countries.

"Developments in labour markets, the structural impact of the pandemic on demand, new energy policies and the effectiveness of the large scale monetary and fiscal stimulus measures are factors that will further impact oil demand in the short term," the exporters' group said in its latest report.

On the supply side, Opec said the higher prices seen in the crude commodity markets could prompt a higher level of US production.

Drilling and completion trends indicate "possible future robust monthly growth".

However, the liquids supply forecast for the US is unchanged with 160,000 bpd of growth expected year-on-year. Non-Opec sources such as Canada, Brazil and Norway are also expected to add to supply growth this year.

Brent, the international marker, was up 1.01 per cent at $63.92 per barrel at 5.40pm UAE time. West Texas Intermediate, which tracks US domestic grades, was up 0.97 per cent at $60.28 per barrel.