Delta variant a temporary setback for O&G
KUCHING: Concerns over the spread of the Delta variant worldwide continues to cloud demand outlook for labourintensive sectors such as oil and gas (O&G).
Researchers at Public Investment Bank Bhd (PublicInvest Research) recapped that in the US alone, Covid-19 cases have risen 70 per cent with deaths increasing by 26 per cent
Nevertheless, it is understood that the outbreaks are occurring in parts of the country with below-average vaccination rates.
“While we think the variant would hinder the stronger recovery in demand outlook, we foresee the setback will be temporary, with countries likely to implement quicker lockdowns and hasten the vaccination programme while urging people to get vaccinated,” it said in its O&G outlook yesterday.
“It is still unclear how the new Covid-19 variant will affect oil demand. Consumption in the US, the world’s largest consumer of fuel, has steadily strengthened in recent weeks.
“The International Energy Agency’s (IEA) latest report in July is also maintaining its global oil demand forecast with an increase of 5.4 million barrels per day in 2021 and three million barrels per day in 2022 despite the surge of Delta variant cases in the recent month.”
While escalating Covid-19 cases in several countries remained a key risk, PublicInvest Research said improved containment of Covid-19 particularly in developed and emerging countries would mitigate the impact nonetheless.
This comes as the Organisation of Petroleum Exporting Countries and its peers (Opec+) will increase oil production gradually.
Opec+ had on Sunday agreed to increase oil supply by 400,000 barrels each month starting August until the remaining of 5.8 million barrels per day that the group is still withholding returns fully to the market.
This translates to about 14 months and is expected to fully phase out cuts by September 2022. This development comes after the group’s initial meeting at the beginning of the month fell apart amid a disagreement between Saudi and the UAE over the latter’s baseline production quota.
“With that, Opec+ has agreed to new output quotas for several members from May 2022, including the United Arab Emirates with additional quota of 332,000 barrels, Saudi and Russia each by 500,000 barrels while Kuwait and Iraq will see baselines rise by 150,000 barrels each.”