Global oil demand surged by 3.8 mb/d month-on-month in June, led by increased mobility in
North America and Europe. However, demand growth abruptly reversed course in July and the outlook for the remainder of 2021 has been downgraded due to the worsening progression of the pandemic and revisions to historical data. Global oil demand is now seen rising 5.3 mb/d on average, to 96.2 mb/d in 2021, and by further 3.2 mb/d in 2022.
World oil supply rose by 1.7 mb/d in July to 96.7 mb/d after Saudi Arabia ended its extra voluntary production cut and the North Sea recovered strongly after maintenance. Global output is poised to rise further in the coming months after OPEC+ agreed a new deal to unwind its remaining curbs. Following gains of 600 kb/d this year, supply from producers outside the alliance is expected to rise by 1.7 mb/d in 2022 with the US accounting for 60% of the growth.
The recovery in global refinery activity slowed in July as new waves of Covid-19 cut into fuel demand while margins remained under pressure. Throughputs are expected to rise marginally in August before seasonal maintenance starts. Runs in 3Q21 were reduced on demand downgrades, narrowing the increase over 2Q21 levels to 2.5 mb/d. Global refinery runs are now forecast to rise by 3.7 mb/d to 77.9 mb/d in 2021 over year ago, still 3.7 mb/d below 2019 levels.
OECD total industry stocks fell by a large 50.3 mb in June and stood at 2 882 mb, 131.2 mb lower than the 2016 2020 average and 66 mb below the pre-Covid 2015-19 average. The Chinese implied crude balance fell for a third consecutive month, by 35.5 mb or 1.2 mb/d in June.
Preliminary July data for the US, Europe and Japan show that industry stocks rose by a combined 4.2 mb. Crude oil held in short term floating storage increased by 4.5 mb to 103.6 mb in July.
The 2Q21 crude price rally lost steam in July on fears that new Covid-19 Delta cases and weaker economic indicators could slow the oil demand recovery just as more supply hit the market.
Despite big swings, North Sea Dated still rose $2.03/bbl to $74.99/bbl but fell to $70.73/bbl in early August. Backwardation only eased in August with the fall in prices.
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