Global energy consultancy Wood Mackenzie on Friday predicted a rise in crude oil prices toward $70-$75 per barrel in April boosted by the decision taken by OPEC+ to roll over output cuts in April.
Wood Mackenzie forecasts that global demand will increase year-on-year by 6.3 million barrels per day (bpd) in 2021.
"If OPEC+ does not increase output in April, except the small amounts for Russia and Kazakhstan, the stock draw will be significantly more than 1 million bpd next month, as the summer demand season looms," the consultancy said.
The company's vice president Ann-Louise Hittle said the OPEC+ decision revealed the group’s choice not to raise production before seeing an actual recovery, as opposed to anticipating one.
"The market was expecting a substantial increase in production because a tightening in the supply and demand balance is already evident," she said.
"Clearly OPEC+ has decided to take a cautious approach to demand recovery. However, waiting for a solid sign of strong stock draws means prices will have already increased from the present level by the time that sign emerges," Hittle added.
“Stocks are a lagging indicator and already the market can see solid signals of demand strength”, she said, adding that a recovery is being spurred by the ramping up of vaccination programs in the US, the world's largest consumer, and with the Biden administration promising enough vaccines for every adult by the end of May.
Hittle said although these higher prices may dampen the tentative global recovery, the Saudi Energy Minister, Prince Abdulaziz, is adamant OPEC+ must watch for concrete signs of a demand rise before he moves on production.
"When compared against last year's collapse, we expect a strong recovery in oil demand for the second quarter of 2021, of nearly 14 million bpd year-on-year after a subdued gain of 0.8 million bpd in the first quarter of 2021," she said.
With OPEC+ production restraint in place in April, she said upward pressure on prices is likely to continue as demand surges.
By Sibel Morrow and Firdevs Yuksel