Oil Futures Gain as IEA Lifts Demand Outlook Through 2022

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange rallied in early trade Thursday after International Energy Agency upgraded its global oil demand projections through 2022, citing ongoing shortages of national gas, coal and liquefied natural gas amid rising mobility across major economies, while a larger-than-expected drawdown from domestic fuel inventories added additional support for the oil complex.

In its monthly Oil Market Report released Thursday morning, IEA boosted its 2021 global oil demand projections by 170,000 barrels per day (bpd) for annualized growth of 5.5 million bpd, while also upgrading its demand outlook for next year to above pre-COVID levels of 99.6 million bpd, up by 210,000 bpd from the previous month.

Behind the upward revisions are a combination of factors, including the ongoing energy crisis in the European Union, declining numbers of COVID-19 cases, and rising mobility across major economies of the Northern Hemisphere.

"Record coal and gas prices as well as rolling blackouts are prompting the power sector and energy-intensive industries to turn to oil to keep the lights on and operations humming," said IEA in comments accompanying the forecast.

Paris-based energy watchdog estimates that ongoing energy crisis could boost demand by 500,000 bpd compared with normal conditions.

Crude oil stockpiles held by countries that are part of the Organization for Economic Cooperation and Development fell by 23 million barrels (bbl) in September according to preliminary data to stand 210 million bpd below their five-year average and at their lowest level since March 2015.

Further contributing to the higher demand outlook is the declining number of new COVID-19 cases and improved mobility in the United States and European Union. Global gasoline demand is currently running 2% below pre-COVID levels compared with a deficit of more than 10% at the start of the year. Air-travel, however, is still lagging behind.

On the supply side, the agency expects global oil production to rise by 2.7 million bpd for the remainder of the year as U.S. output rebounds from Hurricane Ida and Organization of the Petroleum Exporting Countries and Russia-led partners gradually unwind their output cuts. Of note, the agency estimates that the OPEC+ spare capacity will decline sharply next year to below 4 million bpd from 9 million bpd in first quarter.

IEA's bullish forecast follows similar projections from OPEC economists who see global oil demand growing 5.8 million bpd this year, slightly lower from the previous forecast due to weakness in the first three quarters of the year. OPEC sees demand in the fourth quarter jumping to 99.82 million bpd, supported by a seasonal uptick in petrochemical and heating fuel demand.

Separately, the American Petroleum Institute reported late Wednesday U.S. commercial crude oil supplies increased by 5.213 million bbl in the week-ended Oct. 8 compared with expectations for crudes stocks to have gained 900,000 bbl. Data also showed stocks at the Cushing, Oklahoma storage hub dropped 2.275 million bbl last week. Gasoline stockpiles slid 4.575 million bbl in the week ended Oct. 8, missing estimates for a 600,000 bbl increase. API data show distillate inventories fell 2.707 million bbl, more than twice an expected 1.1 million bbl draw.

Next, traders await the release of official inventory data from the U.S. Energy Information Administration scheduled for an 11:00 a.m. ET release.

Near 7:30 a.m. ET, November West Texas Intermediate futures jumped $0.94 to trade at $81.39 bbl, and the international crude benchmark Brent contract for December delivery added $0.96 to near $84.14 bbl. NYMEX ULSD November contract advanced 2.46 cents or 1% to $2.5457 gallon, and front-month RBOB rallied 2.51 cents to $2.4298 gallon.

Liubov Georges can be reached at liubov.georges@dtn.com

Liubov Georges