BAKU, Azerbaijan, Jan.5
By Leman Zeynalova – Trend:
Shale oil production is expected to return to growth in 2022 at a reduced rate, Trend reports with reference to Fitch Solutions.
“Sharp capex reductions are driving declines in non-OPEC supply, led by significant losses in the US shale patch. However, we expect shale production will return to growth in 2022, albeit at a reduced rate,” the company said in a recent report.
Fitch Solutions maintains its 2021 Brent forecast, with the benchmark to set average USD53.0/bbl in 2021, as OPEC looks to poised to regulate oil supply based on monthly changes in the demand outlook.
“The global roll-out of Covid-19 vaccines also provides a boost to global economic recovery and fuel demand. The OPEC balancing act will seek to return barrels to market as quickly and prudently as possible to ensure expanded market share without having prices rise too quickly. In our view, the early January 2021 meeting of OPEC+ will likely result in a reduction of production cuts as recent price gains look to be consolidating and group members are seeking higher outputs to increase market share. However,f undamentals indicate a more pragmatic approach would be to hold the cuts at the current levels,” the company said.
Fitch Solutions expects 2021 global fuel demand to grow by 4.6mn b/d after falling by 7.1mn b/d in 2020 as the global economy continues to recover and transport and commerce return closer to historic pre-pandemic levels.
“However, near-term demand growth is stalling due to the resurgence of Covid-19 across North America, Europe and the Middle East and is likely set for deeper declines over the next several months. This adds to our view for neutral to bullish prices across most of 2021 with difficult conditions to persist through the first half of the year. Our mid-term forecast takes the view that following pandemic, most markets will experience a lower level of demand growth than was seen prior to Covid-19, reflecting softer real GDP growth, rising energy efficiency, falling energy intensity, fuel switching and persistent social distancing behaviours. In light of the muted recovery in demand, large-scale supply-side adjustments will be needed in order to rebalance the market and work off swollen global crude inventories.”
The view for 2021 will depend on OPEC+ and their actions, according to the company.
“Counter to our view last month for a rollover of production cuts for three months, OPEC+ have now implemented monthly assessments to alter production by increments of 500,000b/d with January seeing cuts reduced by this amount. OPEC meets next on January 4 to discuss targets for February. Despite the rapid increase in infections in Europe and the US as well as slowing fuel demand, we expect OPEC+ to approve an increase in output of 500,000b/d. In our view, this has three benefits: Allowing key OPEC members in the most distress to increase output, thus allaying tensions. Returning barrels to markets in the quickest and least pricing damaging manner. Securing OPEC market share and tempering optimism of non-OPEC+ producers before higher oil prices encourage new production.”
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