OPEC Sees Strong Demand Recovery


Oil markets traded to new recent highs yesterday, with ICE Brent hitting an intraday high of US$72.93/bbl. There was a brief moment of weakness, with reports that the US lifted sanctions against a former Iranian oil official. However, with key oil sanctions still in place, it didn’t take long for the market to rebound. The stronger than expected US inflation numbers would have also provided support to oil and the broader commodities complex, with investors turning to commodities as an inflation hedge.  

Source: iStockphoto

OPEC released its monthly reported yesterday which showed that the group pumped 25.46MMbbls/d in May, up 390Mbbls/d MoM. The bulk of this increase came from Saudi Arabia, with the Kingdom increasing supply by 345Mbbls/d. Under the OPEC+, members of OPEC were allowed to increase output by 527Mbbls/d (including the part of the additional voluntary cuts that Saud Arabia is to bring back to the market). The shortfall was a result of lower output from a number of African producers, with Nigerian and Angolan supply falling by 72Mbbls/d and 60Mbbls/d respectively.  There were some minor changes to the group’s demand outlook, with demand expected to be marginally stronger than previously estimated over the second half of this year. However, OPEC still holds the view that oil demand over 2021 will grow by 5.95MMbbls/d YoY to average 96.58MMbbls/d. The demand recovery that OPEC is forecasting later this year does suggest that we will need to see some considerable production increases from the group over 2H21.

The IEA will be releasing its monthly oil market report later today, where they will share their views on the outlook for the market. The report will likely highlight the increasingly tight outlook for later this year, and the need for OPEC+ to increase output further. If so, the report will likely be supportive of prices once released.


Base metals came under pressure during the early London session yesterday, after China’s top banking regulator warned retail investors to avoid speculation in financial derivatives, including commodities and gold. In addition to the repeated warning from officials on high commodity prices, speculation continues about the potential for a China State Reserve Bureau (SRB) stock release. While this is still unconfirmed, some investors are becoming cautious. For aluminum, it is reported that the SRB could release 800-900kt of primary aluminum from next month. However, there is also a report that the SRB will release copper, aluminum, and zinc stocks at the end of each month and continue the process until 2021, according to SHMET.  

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Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any ...

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