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Pemex Fire, Hurricane Ida Dent OPEC Supply Forecast as Oil Demand Gathers Momentum
Two events in the Gulf of Mexico have dented the latest 2021 supply forecast by the Organization of the Petroleum Exporting Countries (OPEC).
In the cartel’s latest Monthly Oil Market Report (MOMR), oil supply outside of the OPEC countries for 2021 was revised lower by 0.17 million b/d from the previous forecast because of a 0.5 million b/d downward adjustment for 3Q2021.
OPEC pointed to the fire on a Mexico offshore platform that caused petroleum shortages. In addition, there have been continued “disruptions caused by Hurricane Ida,” researchers said.
The fire on the E-Ku-A2 platform operated by state oil company Petróleos Mexicanos (Pemex) took about 421,000 b/d of production offline, with several days elapsing before output was fully restored.
OPEC researchers expect Mexico liquids production to average 1.93 million b/d in 2021, up 10,000 b/d from last year but a downward revision of 12,000 b/d from the previous forecast.
For 2022, OPEC has revised its Mexico supply forecast upward by 10,000 b/d to 1.96 million b/d, a 4,000 b/d increase from forecasted 2021 levels.
“Pemex is scheduled to bring on stream a string of smaller developments, but is suffering some delays resulting from pandemic related financial and operational hurdles,” researchers said.
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After Ida crashed ashore in Louisiana late last month, it left in its wake massive oil production cuts as companies struggled to restart offshore platforms amid damage, flooding and power outages, according to the U.S. Energy Information Administration (EIA). U.S. production for the week ended Sept. 3 dropped to 10.0 million b/d from 11.5 million b/d during the prior week, according to EIA’s Weekly Petroleum Status Report.
According to OPEC, the main drivers for global oil supply growth this year continue to be Brazil, Canada, China, Norway, Russia and the United State. The United States, it said, is expected to see year/year growth this year of “only 0.08 million b/d.”
Meanwhile, global oil demand in 2022 is gathering pace to exceed pre-pandemic levels, OPEC said.
The cartel said the Covid-19 Delta variant put a crimp in forecasts for the second half of 2021. However, economic growth worldwide in 2021 and 2022 remains unchanged from an assessment in August.
OPEC expects the global economy overall to grow at a rate of around 5.6% in 2021, with growth of 4.2% in 2022.
“Oil demand in 2022 is now projected to reach 100.8 million b/d, exceeding pre-pandemic levels,” the OPEC researchers said.
There are some warning signs, however. The forecast robust growth “continues to be challenged by uncertainties such as the spread of Covid-19 variants and pace of vaccine rollouts worldwide, as well as ongoing global supply-chain disruptions,” the researchers said. “Additionally, sovereign debt levels in many regions, together with inflationary pressures and central bank responses, remain key factors requiring close monitoring.”
Based on current economic factors, OPEC kept its U.S. growth forecast unchanged, with 6.1% growth for 2021 and 4.1% for 2022. Europe’s growth also remained at 4.7% for 2021 and 3.8% for 2022. Likewise, the forecast for Japan was unchanged at 2.8% for 2021 and 2.0% in 2022, while China’s economy is expected to grow at an 8.5% rate in 2021 and 6% in 2022.
Global oil demand growth in 2021 remained unchanged from last month’s assessment at 6.0 million b/d.
Worldwide demand in 3Q2021 “has proved to be resilient, supported by rising mobility and traveling activities,” particularly in the developed economies, researchers said. “At the same time, the increased risk of Covid-19 cases, primarily fueled by the Delta variant, is clouding oil demand prospects going into the final quarter of the year,” the researchers said.
OPEC has adjusted its 4Q2021 global oil estimates down. Researchers expect consumption in the second half of this year to be “slightly lower, partially delaying the oil demand recovery” into the first half of 2022.
“Global oil demand in 2021 is now estimated to average 96.7 million b/d,” the researchers said. Still., oil consumption for 2022 “is expected to robustly grow by around 4.2 million b/d, some 0.9 million b/d higher compared to last month’s assessment.”
Tightening Oil Market
The International Energy Agency (IEA) also expects continued tightening of the global oil market this month, driven by factors on both the supply and demand sides of the equation.
In its latest monthly Oil Market Report, the global energy watchdog said it now expects global oil demand to rise by 5.2 million b/d this year, and by 3.2 million b/d in 2022.
“Global oil demand is estimated to have declined for three straight months due to a resurgence of Covid-19 cases in Asia,” IEA researchers said. “Already signs are emerging of Covid cases abating with demand now expected to rebound by a sharp 1.6 million b/d in October, and continuing to grow until end-year.”
World oil supply dropped by 540,000 b/d month/month in August to 96,100 b/d, the IEA team said, and is expected to stay flat in September. Researchers explained that unplanned outages have offset supply increases from OPEC and its allies, aka OPEC-plus.
With additional reporting by Carolyn Davis
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