LONDON- The world will need a lot more oil from OPEC+ as global demand is on track to return to pre-pandemic levels at the end of next year, the International Energy Agency said, just a few weeks after saying long-term oil production must decline to reduce emissions.
“OPEC+ needs to open the taps to keep the world oil markets adequately supplied,” the Paris-based energy watchdog said, adding that rising demand and countries’ short-term policies were at odds with the IEA’s call to end new oil, gas and coal funding in a stark report issued last month.
“In 2022 there is scope for the 24-member OPEC+ group, led by Saudi Arabia and Russia, to ramp up crude supply by 1.4 million barrels per day (bpd) above its July 2021-March
2022 target,” it said in its monthly oil report.
Oil prices were trading near a two-year high of nearly $73 a barrel on Friday, and were on track for a third week of gains, buoyed by optimism about demand recovery.
Brent crude futures settled at $72.69 a barrel, rising 17 cents after reaching their highest since May 2019. For the week, Brent was up 1 percent.
US West Texas Intermediate (WTI) crude futures settled at $70.91 a barrel, up 62 cents, settling at their highest since October 2018. WTI was up 1.9 percent on the week.
“Demand is coming back faster than supply and we’re going to need more supply to meet that demand,” said Phil Flynn, senior analyst at Price Futures Group in Chicago.
US investment bank Goldman Sachs said it expects Brent crude prices to reach $80 per barrel this summer as vaccine rollouts boost global economic activity.
“The rollout of the vaccine in North America as well as Europe is helping to restore demand at the same time that OPEC+ has reigned in production,” helping propel oil prices, said Andy Lipow of Lipow Oil Associates in Houston.
Data showing road traffic returning to pre-COVID-19 levels in North America and most of Europe was encouraging, ANZ Research analysts said in a note.
“Even the jet fuel market is showing signs of improvement, with flights in Europe rising 17 percent over the past two weeks, according to Eurocontrol,” ANZ analysts said.
OPEC+ agreed in April to gradually ease oil output cuts from May to July and confirmed the decision at a meeting on June 1.
Meeting the restored demand is “unlikely to be a problem”, the IEA said, forecasting that OPEC+ will still have 6.9 million bpd of effective spare capacity after July and that Iran’s talks with world powers could free its oil supply from US sanctions.
“If sanctions on Iran are lifted, an additional 1.4 million bpd could be brought to market in relatively short order.”
