Macro Oils short-term outlook: October 2021 Report

Commodity Market Report 07 October 2021

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Report summary

September saw a fire lit under crude prices after reports about the potential for high volumes of fuel switching from gas to oil. Now the oil market stands on a precipice. Will fuel switching and lack of supply growth create a global shortfall this winter? Our detailed assessment of the capability for fuel switching points toward a “no” answer. But that reality needs time to emerge and until then prices could trace higher this month. Our Macro Oils short-term outlook includes: • An updated assessment of OPEC+ spare capacity including from Russia • Where can fuel switching occur and what volumes • OECD and non-OECD rate of recovery versus non-OECD growth in 2022 • Expanded short term forecasts through 2023

Global supply: OPEC rollover and US capital restraint continues despite high prices
- Non-OPEC Supply: US Gulf of Mexico recovers from Ida, downward revisions to US Lower 48 in 2022
- US Lower 48: capital restraint continues into 2023
- Outlook extended to 2023: production increases depend on the US and Russia
- OPEC: group conclude to stick with existing plan to ease volumes back into the market
Global demand: Slowing growth in Asia-Pacific dilutes impact of gas-to-oil switching
- 2021: Q4 demand expected to rise seasonally, but growth tempered on multiple fronts
- 2022: Major trends by region
- Asia-Pacific
- Europe
- North America
- Middle East
- 2023: Demand exceeds pre-pandemic levels as non-OECD growth accelerates
- Risks to the outlook