SINGAPORE – Oil producing group OPEC left its 2021 forecast for crude demand growth unchanged on expectations of an economic recovery. But that may change, warns energy expert Dan Yergin.
IHS Markit Vice President Yergin told CNBC on Friday how effective coronovirus vaccines are, and whether the number of Kovid-19 cases continues to rise.
Expectations of increased oil demand were also lifted on Thursday when US President-Elect Joe Biden released a $ 1.9 trillion Kovid-19 rescue package designed to support homes and businesses.
Yergin said that in addition to the stimulus package, two factors also fueled optimism. “There are two other things that are going along with it … one is, of course, vaccination – in the sense that this crisis is finally going to end, and probably by spring, the lockdowns will be over.”
“The second thing is that Saudi Arabia has done this. This is the third time Saudi Arabia has made a sudden change in policy in less than a year, and it was announced (1) of 1 million barrels per day Reductions – partly because they are concerned about the effect of the increase in the virus, which is happening, ”he said.
OPEC members and their non-OPEC partners, a coalition known as OPEC +, cut oil production by a record amount in 2020. He did so in an effort to support prices, as Kovid-19 led to worldwide restrictions and later air travel. Fuel demand setback.
Saudi Arabia, the world’s largest oil exporter, has said it plans to cut production by an additional 1 million barrels per day in February and March to manufacture inventories.
Yergin said that both the vaccine rollout and the supply cut “carry oil prices that I was calling from Virus Alley and look to recover in 2021.”
Oil prices are currently moving up for the third consecutive week. In Asia, US crude was $ 53.08 on Friday, up from $ 48 a barrel at the end of December, while Brent crude was at $ 55.69 compared to $ 51.6 on Friday.
OPEC said that it has seen an increase in global oil demand by 5.9 million barrels per year in 2021, an average of 95.9 million barrels per year. The forecast was unchanged from last month’s assessment.
In a report on Thursday, it said its 2021 forecast is “a healthy improvement in economic activity, including industrial production, labor market reforms and higher vehicle sales in 2020.”
However, Yergin warned that the demand for oil will depend on how the virus develops.
CNBC’s “Squawk Box Asia” reported on Friday that if the coronavirus virus continues to grow and “if the vaccine does not take effect as thought, you will return to weak demand, and its price will decrease.” “But there is clearly optimism in the oil price.”
‘Second Revolution’ for US Shell
The time for the “second revolution” has come for American shale producers, Yergin said. The industry’s drilling boom propelled the US to the position of the world’s largest oil producer in 2018.
“This is the second revolution for Shell to give money back to investors. (They) are in better shape to do so. Now you will see consolidation, you will see continued efforts to bring costs down.” he said.
“So I think we’ll start creeping US shale into production again in the second half of this year,” he said, adding the caveat that there are no negative coronavirus scenarios.
Nevertheless, it is still unclear what Biden’s energy policies could mean for the US shale industry.
In December, US Energy Secretary Dan Broillet warned that US shale producers should be concerned about the “very aggressive” climate policy that would accompany the incoming Biden administration.
Many analysts say Biden cannot ban faking, the fossil fuel extraction process by which shale gas is produced – but will aim to regulate it.
– Sam Meredith, Natasha Turk and Patti Dam of CNBC contributed to this report.