Crude Oil Demand: optimism of the OPEC remains unchanged

Crude oil demand 21 / 22 OPEC

Despite the presence of volatility in the crude oil markets, the OPEC is still optimistic about the demand of the commodity during the next few months of this year and for the entire next year.

Although the emergence of the Delta variant of the Coronavirus has dealt a critical blow to the recovery of the global economies, the OPEC still hopes that the average demand of crude oil for this year is going to be around 96.6 million bpd; based on these estimates, the organization believes the same figure for the next year will exceed 100 million bpd.

The OPEC must have taken into account the way the US, China and India have been affected by the new outbreaks of the pandemic: last week, there was a build-up of US crude inventories and according to the latest data from the EIA, US Energy Information Administration, there was a modest draw of the crude stocks for the week ending August 06 – just 0.446 million barrels; the crude imports by both China and India, meanwhile, have gone down significantly, throwing the forecasts to the contrary into doubt.

In addition, the other major crude oil importers in the regions such as South Korea, Japan, Thailand, Malaysia and Indonesia are going through critical phases of the pandemic, leaving large swathes of the lands in extended lockdowns.

The combined impact of these developments is going to skew the demand curve of the commodity in a direction that we thought never happen, especially in the second and third quarters of this year, because of the relative success of the vaccine rollout.

The OPEC, however, still believes that the demand will survive the worrying developments. The basic calculations have made OPEC increase its daily production by 400,000 bbd up until December, 2021, without letting the price of crude oil drop.

In an unusual development, President Biden has waded in to the debate of high oil price; the wants OPEC to increase the production, not to let the inflation getting out of control. So far, OPEC has been remaining tight-lipped about the response; the organization, however, cannot ignore the presidential request.

The irony is that President Biden is in the middle of a ‘revolution of green energies’; a move of this kind may not go down well with those who want to accelerate the green movement at the expense of fossil fuel.

President Trump used to do the same when he felt that the price of oil was far too high; in his case, not only did he demand that they come down, but also pressurised both allies and acquaintances alike, to get what he wanted.

With the revival of the JCPOA, 2015 Iranian nuclear deal, being on ice, the possibility of Iranian oil arriving into the markets appears to be very remote.

Therefore, OPEC will be compelled to address the issue of crude oil price without harming the fragile growth of economies across the world.


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