The International Energy Agency said on Thursday that the global shortage of natural gas is prompting end-users, especially utilities, to switch to oil products. As a result, global oil demand is increasing and deepening the already sizable supply deficit in crude markets. Crude oil prices have exceeded $80 per barrel, the highest in three years, as traders anticipated higher demand from the switch from gas. According to the IEA, the switch could increase global oil demand by about 500,000 bpd over the coming six months.
The IEA also raised its estimate for demand growth for 2021 by 300,000 bpd to 5.5 million bpd and increased it slightly for 2022 to 3.3 million bpd. The Paris-based agency noted that the effect of oil-gas switching will mostly be felt in the fourth quarter of 2021 and the first quarter of 2022. The IEA also projects that global oil output will increase by around 2.7 million bpd from September to the end of the year.
Despite rising prices and demand outlook, OPEC+ has shown no signs to adjust its plan to gradually tapering its supply curtailments. Major oil-consuming countries, such as India, have repeatedly urged the producers to boost supplies to prevent prices from spiking further and boosting inflation. The group has decided to stick with its plan to carefully revive idle production by 400,000 bpd.
