OPEC raises forecasts for global oil demand as Mexico’s Pemex prepares to experience slight increase in production
The Organization of the Petroleum Exporting Countries (OPEC) on Tuesday officially raised its expectations for global oil demand in 2021, citing expectations for a recovery from the pandemic and stronger economic growth.
In its Monthly Oil Market Report (MOMR), the cartel’s projected demand would increase by 5.95 million bpd this year, an increase of nearly 7% from 2020. The estimate is up 70,000 bpd compared to the group’s earlier forecasts in March.
“Gasoline is expected to be the main driver of the recovery in oil demand from the start of the summer driving season,” OPEC said in MOMR.
“While the spread and intensity of the Covid-19 pandemic is expected to ease with the ongoing roll-out of vaccination programs, social distancing requirements and travel limitations are expected to be reduced, providing increased mobility in various regions of the world, ”the cartel added.
The forecast bodes well for the heavily indebted Mexican state oil company Petróleos Mexicanos (Pemex), which reported a loss of $ 23 billion in 2020 as Covid-19 ravaged global oil demand and prices.
OPEC said it expects Mexico’s liquids production to average 1.94 million b / d in the second half of 2021, up 40,000 b / d from expected production in the second half of 2021. 1st semester 2021.
The projected increase is due to the start of the first phase of the Pokoch-Ichalkil fields with a peak capacity of 100,000 b / d. As a result, Mexico’s oil supply is expected to increase by 10,000 b / d and an average of 1.92 million b / d in 2021, OPEC researchers said.
Pemex, in its recently released 2021-2025 business plan, stated its intention to increase natural gas production to 4.19 Bcf / d in 2021 from 3.64 Bcf / d in 2020, and to increase the liquids production at 1.94 million bpd from 1.69 million bpd. d in 2020.
“In mid-March, Pemex announced the discovery of a billion-barrel oil field in the state of Tabasco located in the southern Gulf of Mexico,” OPEC researchers said. “This discovery, along with the recently discovered Quesqui gas and condensate field with 900 million barrels, aims to reverse a decade of declining production.
“While Pemex has discovered significant volumes in recent years, even more production is needed to compensate for natural declines.”
The recovery of the Mexican economy this year “depends in large part on the fate of [Pemex]According to a new brief released by the Baker Institute for Public Policy at Rice University.
Authors Tony Payan and José Iván Rodríguez Sanchez wrote that “Pemex could become an important input to the economy if oil prices rise significantly, but that would also depend on the global recovery. For now, however, it is a drag on the country’s gross domestic product. ”
West Texas Intermediate (WTI) crude oil futures for May delivery gained $ 2.97 to settle at $ 63.15 / bbl on Wednesday, while the price of the export basket of crude oil from the Mexico was $ 57.90 / bbl.
Moody’s Investors Service analysts predict 2021 prices will average in the middle of their forecast range of $ 45 to $ 65 / bbl.
Earlier this year, OPEC lowered demand expectations, cut production and expressed concerns about the continuing impacts of the pandemic, including further lockdowns in Europe.
In early April, however, the Saudi-led cartel and its allies, aka OPEC-plus, shifted gears and agreed to increase crude production, citing expectations of rising demand over the summer and in autumn. The allied group of major producers agreed to increase production by 350,000 bpd in May and June, then increase it to 450,000 bpd in July. Saudi Arabia also plans to start slashing cuts it made earlier this year.
In total, BMO Capital Markets analysts estimated the changes would represent an increase in OPEC-plus production to 38 million b / d in July, from around 35.5 million b / d in March, “In large part because of the outcome of Saudi Arabia’s extra-voluntary program. reduction of 1 million bpd. Before the pandemic, analysts said the cartel and its allies were producing around 41.3 million bpd.
Given the decision to increase production, it would have been “rather embarrassing for the producer group to reduce its global demand,” said analyst Robert Yawger, director of energy futures at Mizuho Securities USA LLC.
OPEC has also raised its 2021 economic growth forecast to 5.4% from 5.1%.
In its new report on Tuesday, OPEC officials said earlier production limits helped align supply / demand, and they noted that production remains below 2019 levels, leaving room for pockets of weak demand in the coming months.
“Regarding global stock levels, there have been significant declines since mid-2020 and these are expected to continue in the coming months, mainly due to successful efforts” from OPEC’s earlier limits -more, said the cartel. “These reductions in excess inventory along with the expected recovery in product demand will pave the way for a cautious recovery in oil market balance over the summer months, supporting refining margins and throughputs.”
However, added the group, “the great uncertainty surrounding the fragile recovery from the unprecedented impact of Covid-19 continues to require vigilant monitoring of market developments, despite the large-scale stimulus measures and the first signs of a return to normal as progress continues. immunization programs in many major economies. “
Andrew Baker contributed to this story.