March 2021's edition of Glenloch Energy's Oil Market Forecast comes as the OPEC+ supply schedule, agreed in January 2021 expires, which makes this a good time to examine how OPEC+ curbs could evolve through the rest of the year. March also saw the publication of Oil 2021, the IEA’s updated medium term oil market report, the first update from the IEA this year.
Glenloch Energy spends some time looking at how their demand forecast, in particular, has changed over the last few months.
A few key points:
- The IEA’s updated medium term oil market report suggests a significant increase in medium term oil demand when compared to their long term “Stated Policies” demand case.
- There is a substantial gap in the breakeven oil price required between the large OPEC nations and Russia, resulting in a divergence of interests as oil demand and prices recover.
- The last year saw the US Shale oil industry generate positive free cashflow for the first time in its history.
- Even with a return in US Shale investment, we forecast US oil production will decline through the decade.
- The original OPEC+ supply curb schedule is too tight for demand levels in the current oil market, even with substantial above quota production from Russia.
- Oil demand in 2021 is not yet strong enough to support a return to full productions levels from OPEC+ nations.
- We expect to see a continued relaxation of OPEC+ production curbs throughout the rest of the year, with the non-OPEC nations returning to full production and OPEC curbs relaxing through the second half of the year.
- Both WTI and Brent futures have been stable over the last month.
- The US land oil rig count continues to climb but does not appear to be accelerating at the moment.
Access Glenloch Energy's March OMF here.