The recovery from the pandemic is accelerating rapidly, at least in light of burning demand in the oil market.
The International Energy Agency and OPEC forecast a bullish demand for oil in 2021: the IEA this week said producers should increase supply by 2 million barrels a day to catch up on demand, while OPEC raised its own forecasts to 5.95 million barrels a day for the year.
Regina Mayor, world energy chief at KPMG, says the forecasts are about money. She sees three tailwinds that should continue to fuel demand until the summer and beyond.
“One is the accelerated pace of vaccinations. Particularly in countries like the United States and the United Kingdom, we are really seeing the deployment of vaccines exceed our expectations. Second, we continue to see strong government stimulus spending for encourage consumer activity and consumers, ”the mayor told CNBC’s“ Trading Nation ”on Thursday.
The third reason? The mayor says it’s basic human behavior.
“We are all fed up and tired of being quarantined and restricting our movements. You see something anecdotal [and] very specific data points that point to that, ”he said, highlighting TSA passages at U.S. airports and miles traveled by interstate highways at pandemic highs.
High expectations about oil demand could justify the recent rise in prices. West Texas crude oil, for example, is trading at a one-month high and has risen to 30% this year. WTI traded above $ 63 a barrel on Friday.
Still, short-term concerns could tip the balance and bring prices down, Mayor says.
“The biggest risk is the speed with which OPEC + will recover this supply and then the speed with which Iranian barrels enter the market. And remember that there are still about 7 million barrels per day of supply that is they are voluntarily left out of the market, “she said.
OPEC + has said it will reintroduce 2 million barrels a day into supplies over a three-month period, a gradual step to meet demand, but that it could alter its position if U.S. shale producers start to be “overly euphoric” and increase their own production, the mayor said. OPEC + will meet on April 28.
“I anticipate that these barrels could flood the market and ruin that good balance we’re in right now because $ 60 WTI, $ 65 Brent is a very good position for the industry to get everyone back to profitability,” he said.
Energy stocks have risen as oil prices rise. The XLE energy ETF has risen nearly 30% this year, the best-performing S&P 500.
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