RIYADH — Global oil demand is projected to record a 1.9% quarter-on-quarter growth averaging 100.6 million barrels per day by the end of the third quarter this year, surpassing pre-COVID levels, according to King Abdullah Petroleum Studies and Research Center (KAPSARC) upcoming KAPSARC Oil Market Outlook (KOMO). At 54 million barrels per day, non-OECD countries are expected to account for 53% of that growth.
Despite global headwinds and a looming recession, KAPSARC estimates a rise in oil demand across all nations in Q3, except for India, with the United States leading the way reaching 20.6 million barrels per day, accounting for 21% of demand. China, as second runner up, with roughly 15.3 million barrels per day, accounts for 15% of demand. India ranks third, followed by Saudi Arabia, with 4.8 million and 4.2 million barrels per day, respectively.
KAPSARC's oil and gas team predicts that gasoline will account for most of the demand growth in the United States ahead of the summer driving season. In China, demand is being fueled by the relaxation of COVID-19 restrictions, which translates into a resumption of local transportation activities as explained by Majed Al Suwailem, Oil and Gas Program Director at KAPSARC. “As for India, even though, the team projects it to make up the third biggest demand – the country’s anticipated Q-on-Q growth is slowed by almost 500,000-600,000 barrels per day owing to its monsoon season” he added.
Saudi Arabia is expected to witness a growth in demand this quarter by approximately 300,000-400,000 barrels per day, as the Kingdom aims to satisfy its vast cooling needs throughout the summer season.
On the supply side, 2.2 million barrels per day of net global growth is expected¬ (including the additions from SPR releases). This would imply an organic (non-SPR) increase of 0.9%, hitting 99.4 million barrels per day over the next quarter– this is the highest level of quarter-on-quarter growth seen in several years.
The Center expects U.S. shale to grow its output by 2.5% q-o-q with supply hitting roughly 11 million barrels per day (including NGLs). Saudi Arabia's q-o-q estimates point to growth of 3.2% reaching 12,356 million barrels per day for all liquids. This would account for about 60% of total OPEC oil supply growth.
KOMO is a quarterly publication by KAPSARC that leverages Saudi Arabia’s market knowledge to present an objective global oil outlook. The outlook forecasts quarterly supply, demand, risks, balances, and pricing using IEA data and econometric modeling, offering a vital third voice to the current Aramco and Saudi Ministry of Energy viewpoints.
The supply/demand projection from KOMO is an average for each quarter and does not consider short-term volatility. Actual supply and demand fluctuations will be variable, reflecting reactions to current geopolitical shifts as well as the duration of the COVID-19 pandemic. Other concerns may include unanticipated oil supply shortages caused by hurricanes, OPEC+ compliance, and escalating/diminishing geopolitical tensions, among others. — SG
