The oil price optimism continues to be alive and well this week as demand growth prospects and rapid vaccine rollouts continue their steady ascent in tandem.
On the demand side, there is positivity in both the US and China, where Biden’s stimulus package and Chinese industrial output growth are helping prices buoy near $70 per barrel.
In the US, the stimulus has largely been priced in since the Democrats took control of the Senate in early January, so the final signature on the dotted line didn’t pull the Brent benchmark price up, but rather reinforced its anchor near $70 per barrel.
China’s industrial output growth rate came as a surprise to traders, who priced up oil as they understand that oil need and industry output growth go hand by hand.
As a result, the pace of economic recovery is continually getting bullish upgrades, which should spur oil demand to 97.3 million bpd in the second half of 2021, by our forecast.
This week, the general consensus on the status of monetary liquidity will get further clarity after central bank policy decisions from Russia, Japan, Brazil, Turkey, Indonesia England, and Norway.
The general positive momentum in economic recovery, vaccines, and oil demand have significantly tightened the oil market outlook on top of Saudi-led measures to keep OPEC+ production cautious.
The new OPEC+ policy decision from March to roll-over cuts into April led us to revise down April 2021 global crude and condensate supply by 981,000 bpd, of which negative revisions of 786,000 bpd are attributed to OPEC+ countries.
Adding to the momentum, large-scale maintenance in Canada, the UK, and Norway in the spring will coincide with the sweeping OPEC+ cuts, further tightening an already taut market.
Currently, we estimate crude oil production from the non-OPEC+ countries will go down significantly by about 833,000 bpd in April 2021 and 800,000 bpd in May 2021, driven by maintenance shutdowns at the major oil sands project in Canada and offshore crude oil fields in the Norwegian and UK North Sea.
In Canada, we expect crude oil production to go down by 663,000 bpd and about 520,000 bpd in April and May 2021 due to maintenance shutdowns at major oil sands projects.
The outage volumes are much higher than the usual second-quarter Canadian oil maintenance levels ranging between 400,000 bpd and 500,000 bpd.