Global economic recovery has been delayed due to the resurgence of COVID-19 infections and renewed lockdowns in key economies, including the Euro-zone, Japan and India, which kept growth rates low in 1H21. However, the ongoing vaccination efforts, growing share of recovered cases leading to increasing herd immunity, and the easing of lockdown restrictions lend optimism that the pandemic could be contained in the few months to come.

These developments, combined with broad-based stimulus measures, high savings rates in advanced economies, and pent-up demand following the lockdowns, are expected to add momentum to the economic rebound towards the end of 2Q21. Consumption is forecast to improve, particularly in the contact-intensive sectors, and investment is anticipated to rise, with the stabilization of crude oil markets expected to add further upside in some producer countries, including the US. Consequently, GDP growth rates in 2H21 are forecast to significantly exceed that of 1H21 (Graph 1). The ongoing fiscal stimulus in the US, amounting to almost $3 trillion, or more than 3% of global GDP, is one very important supporting factor, as is China’s successful containment of COVID-19 and the country’s consequent swift economic recovery. However, numerous challenges remain. New virus variants and/or mutations could diminish, or even neutralize, ongoing containment strategies. Moreover, a strong recovery could lead to rising inflation and a necessary reduction of monetary stimulus, resulting in higher interest rates. Moreover, very high sovereign debt levels amid rising interest rates could pose a burden on the fiscal health of many economies.

Following an estimated growth of 1.1 mb/d in 1H21 compared with 2H20, non-OPEC oil supply, including OPEC NGLs, is forecast to grow by 2.1 mb/d in 2H21 compared with 1H21, which is up by 3.2 mb/d y-o-y. For the entire year, non-OPEC liquids supply is forecast to grow by 0.84 mb/d y-o-y (Graph 2). On a regional basis, some 1.6 mb/d out of total incremental production of 2.1 mb/d in 2H21 is expected to come from the OECD region, mainly from the US with 1.1 mb/d and the rest from Canada and Norway. At the same time, liquids supply growth from the non-OECD regions is forecast at only 0.4 mb/d in 2H21. Overall, the recovery in global economic growth, and hence oil demand, are expected to gain momentum in 2H21. At the same time, the successful efforts of the DoC have substantially led the way towards a market rebalance. This foresight, along with an ongoing joint vigilant monitoring of developments, continues to support the oil market, in tandem with the expected recovery in the various economic sectors.
Source: OPEC