The impact of Hurricane Ida and other oil supply outages will take a sizable chunk out of global oil production this year, the International Energy Agency said Tuesday.
In its monthly market report, the energy watchdog cut its supply rebound forecast for 2021 by 150,000 barrels a day and cut its demand forecast by 100,000 barrels a day, citing the impact of the Delta variant of Covid-19.
While offshore installations have been slow to restart production after the outages triggered by Hurricane Ida, refineries have been quick to restart operations, forcing sharp stock draws of both crude oil and refined products, the IEA said. It noted that both the U.S. and China have recently tapped their strategic oil reserves to keep refiners operating.
“It is only by early 2022 that supply will be high enough to allow oil stocks to be replenished,” the Paris-based organization said. “In the meantime, strategic oil stocks from the U.S. and China may go some way to help plug the gap.”
Oil prices added to their Monday gains early on Tuesday, with Brent crude, the global benchmark, up 0.8% at $74.06 a barrel. U.S. crude futures rose 0.8% at $71.01 a barrel, with around 40% of U.S. Gulf of Mexico production remaining out of action in the aftermath of Ida, according to Dutch bank ING. Around 26 million barrels of crude production have been lost since late August, ING added.
The outages from the hurricane combined with fires at oil facilities in Mexico and Russia as well as operational problems in Nigeria and Libya to take 600,000 barrels a day of global oil production out of action in August, the IEA said, adding that those outages forced a decline in global oil supply for the first time in five months during August.
Prices were lifted Monday by OPEC’s monthly report, in which the cartel significantly boosted its 2022 global oil demand forecast, partly because of the Delta variant’s impact on the global economic rebound. The IEA echoed OPEC in cutting its demand forecast for the third quarter by 200,000 barrels a day, citing the impact of the Delta variant particularly in Asia.
But the IEA didn’t increase its 2022 global demand forecast, remaining slightly more conservative than its Viennese counterpart. It expects global demand of 99.4 million barrels next year, while OPEC expects 100.8 million barrels—a figure it said Monday would outstrip pre-pandemic levels.
Despite the drop-off in demand it observed in developing countries, where authorities had to reimpose some coronavirus restrictions, the IEA noted that resurgent travel boosted consumption in the wealthy countries of the Organization for Economic Cooperation and Development.
OECD oil demand in Europe and North America is expected to increase this financial quarter by twice the normal seasonal amount, while it is expected to stagnate in the wealthiest countries in Asia-Pacific. That forecast highlights the continuing impact of travel restrictions and the uneven distribution of coronavirus vaccinations.