IEA downgrades oil consumption forecast due to new COVID-19 variants

The International Energy Agency (IEA) has revised down its expectations for crude oil demand growth for the rest of 2021 due to the impact of the new COVID-19 variants on the pace of the global recovery, according to the latest monthly bulletin of the Paris-based institution. The forecast will help moderate fuel prices, which, according to data released on Thursday, have reached new annual highs and filling the tank is up to 22.5% more expensive in Spain.

Thus, the agency anticipates that world oil consumption will grow by 5.3 million barrels per day (mb/d) this year, reaching an average of 96.2 mb/d by 2021, with a further increase of 3.2 mb/d forecast for 2022.

Global oil demand rose by 3.8 mb/d in June, driven by increased mobility in North America and Europe, but this consumption increase "abruptly reversed course in July and the outlook for the remainder of 2021 has been downgraded due to worsening pandemic developments and revisions to historical data", warns the IEA.

In this sense, the agency points out that crude oil demand growth for the second half of 2021 "has degraded more sharply" as a consequence of the new restrictions against COVID-19 imposed in several major oil-consuming countries, particularly in Asia, which seem to reduce mobility and oil use.

For its part, the IEA stresses that global oil supply is rising rapidly, after producers increased production by 1.7 mb/d in July, while supply is expected to increase further after OPEC+ countries agreed on 18 July to increase production by 400,000 barrels per month from August until the remaining cuts are eliminated.

In this way, the agency warns that the oil market could return to surplus in 2022 if OPEC+ continues to undo its cuts and the producers that do not participate in this agreement increase their supply in response to higher prices, with the United States at the head of this increase.

However, it notes that OPEC+ can still pause, continue or even reverse its restrictions depending on market needs, so it considers it unlikely that the adjustment of cuts by the cartel and its allies will follow a linear trajectory in 2022.

Fuel prices have climbed to new annual highs in the second week of August, making filling up a car tank up to 22.5% more expensive than a year ago.

Specifically, the average price of a litre of petrol has risen by just over 0.2% compared to the first week of August, to stand at almost 1.420 euros, the highest since the end of July 2014, according to data from the European Union Oil Bulletin published by Europa Press.

For its part, the price of diesel has rebounded slightly this week, to 1.270 euros, at maximum levels since November 2018.

In this way, filling the tank in this second week of August is already 22.5% more expensive, in the case of petrol, and 19.8% higher, in diesel, than a year ago.

Specifically, filling an average 55-litre petrol tank now costs around 78.09 euros, some 14.3 euros more than a year ago, while in the case of refuelling with diesel it is around 69.87 euros, some 11.6 euros more than in the August 2020 operation.

Before last Easter, both fuels had already recovered pre-COVID levels. So far this year, the average price of a litre of petrol has risen by more than 18%, while diesel has risen by more than 17%.

This increase in fuel prices in recent months has come hand in hand with the recovery in oil prices. The price of a barrel of Brent quality oil, the benchmark for the Old Continent, is at 71.1 dollars this Thursday (70.6 dollars a week ago), while Texas oil is around 68.8 dollars (68.6 dollars last week).

Despite this increase, the price of 95 unleaded petrol in Spain is below the EU average, at 1.549 euros per litre, and the euro zone, with an average price of 1.601 euros. The same is true for diesel, where the price in the EU is 1.372 and 1.395 in the euro zone.

The lower final price level compared to neighbouring countries is due to the fact that Spain, despite VAT increases, higher taxes and biodiesel levies, still has a lower overall tax burden than the EU average.