OPEC to keep any increase in oil output gradual amid uncertain backdrop – ANZ

The short-term outlook for the crude oil market continues to be shaped by OPEC. With so much uncertainty in the short-term, strategists at ANZ Bank suspect OPEC will be inclined to keep most of the output curbs in place for another month when they meet later this week.

Key quotes

“Overall, the physical market remains well supplied. We see global growth in crude oil demand remaining subdued; with Q1 2021 levels still nearly 5mb/d below the same period last year. Nevertheless, we expect a strong recovery in oil demand for the rest of the year. This is underpinned by our latest economic outlook. We forecast global GDP growth will hit 5.5% this year.”

“As the pace of the vaccine deployment accelerates, we see Q2 demand rising 1.3mb/d in y/y terms from the previous quarter. This will be primarily due to strong growth in the US, but also in Asia. This growth will accelerate in H2, with Q3 demand rising 3mb/d quarter-on-quarter and a similar amount in Q4. By the end of the year, we should see global demand at nearly 99mb/d.”

“We expect the Saudis to extend their unilateral cut again and OPEC+ to roll over most of its April quota for May. However, the concessions ceded to Russia and Kazakhstan are likely to be repeated. We also expect compliance will start to slip. This has led us to revise lower our forecasts for global supply by 1.2mb/d for Q2 and about 0.2mb/d for full year 2021 compared to last month’s case. For 2022, we have raised supply forecasts by 0.5mb/d on higher US production.”

“We expect the increase in OPEC production to remain gradual until there are clear signs that demand has recovered and supply risks have eased. Until that scenario, the market will likely remain tight through 2021.”