Oil market quarterly review

Q3 2021

Q3 2021

Executive summary

  • As economies continued to wrestle with the consequences of the COVID-19 crisis, oil demand in Q3 2021 recovered at an increasing pace. Experts are predicting oil consumption returning to the pre-pandemic level by the end of 2022. At the same time, continued uncertainty over how the global battle against COVID-19 will play out, energy shortages, and a rapid rise in prices may negatively affect the pace of the recovery in demand.
  • The oil supply volume in Q3 2021 was impacted by production growth under the OPEC+ deal, according to the scenario approved in July, and it remained unchanged in early October. The consequences of Hurricane Ida also had an impact. The resulting oil market shortage triggered an accelerated reduction in commercial oil inventories and a drop to a three-year low.
  • An artificial oil market deficit and price «rally» on European and Asian gas markets led to an increase in Brent oil quotes to USD 79/bbl by the end of September 2021, a threeyear high. Due to continued fuel shortages and high energy prices, the risk of a global economic slowdown is getting more feasible. Nevertheless, as there were no changes in fundamental price formation factors, the long-term forecast remained at around 60 USD/bbl in 2021 prices.
  • Further oil market equilibrium will depend on OPEC+ policies and whether there will be increased shale oil production in the United States. US companies will need to invest additional cash into new projects to boost production. However, in the face of higher production costs and a strengthening environmental agenda, capital raising issues may contribute to uncertainty over the future development of the US oil shale industry.

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