IEA warns oil demand recovery stalls as COVID-19 impact drags

The International Energy Agency said Aug. 12 the global oil demand recovery had gone into reverse in July with an estimated monthly fall of 120,000 b/d due to the COVID-19 pandemic resurgence in China, Indonesia and elsewhere in Asia.

In its latest monthly oil market report, the agency lowered its estimate of 2021 demand growth from 5.4 million b/d to 5.3 million b/d, while raising its 2022 growth estimate from 3.0 million b/d to 3.2 million b/d.

A July 18 agreement among the OPEC+ nations is also easing supply fears and could lead to oversupply by Q1 2022 if maintained, the IEA said, adding "It looks unlikely that the unwinding of cuts will continue on a linear trajectory in 2022."

The IEA cuts its estimates of the so-called 'call' for OPEC crude from the current quarter through all four quarters of 2022.

"The immediate boost from OPEC+ is colliding with slower demand growth and higher output from outside the alliance, stamping out lingering suggestions of a near-term supply crunch or super cycle," the IEA added.

Alongside the boost from OPEC+ nations, the IEA lowered its estimate of supply growth from outside the group this year from 770,000 b/d to 600,000 b/d, noting a heavier-than-expected impact from maintenance and outages in the North Sea and Brazil, while it raised the estimate from 1.6 million b/d to 1.7 million b/d next year.

"Fundamentals suggest support for Dated Brent may last a few more weeks before easing as crude buying shifts to coverage for the lower autumn seasonal demand and refinery maintenance period," S&P Global Platts Analytics cautioned in a note on Aug. 5.