The global crude oil market supply and demand game is not over

If the supply-side reduction is too fast, there will be a temporary imbalance in the short term

The imbalance in the regional distribution of crude oil supply and demand determines the flow direction of crude oil trade on a global scale, with Saudi Arabia leading the Middle East as the main crude oil export region, and the world's major crude oil importers include China, India and Japan in Asia, as well as Europe and the United States
.
From a medium- and long-term perspective, under the background of "carbon neutrality", the demand for primary energy will continue to decrease, and the realization of clean replacement of new energy and new business is the general direction
of future energy development.
However, in the short term, demand substitution still needs a period of time to be realized, if the supply side is reduced too quickly, there may be a phased imbalance between supply and demand in the short term
.

Supply: Further recovery of exploration activity is expected

From the perspective of global reserves, global crude oil reserves reached 1.
7324 trillion barrels
by the end of 2020.
Global crude oil resources are mainly distributed in the Middle East and the Americas, of which the Middle East crude oil reserves account for 48%, the Americas account for 33% (Central and South America 19%, North America 14%), followed by Russia-led CIS countries, accounting for 8%, Africa reserves accounted for 7%.

In terms of countries, Venezuela's crude oil reserves ranked first in the world in 2020, reaching 303.
8 billion barrels, followed by Saudi Arabia (297.
5 billion barrels), Canada (168.
1 billion barrels), Iran (157.
8 billion barrels), Iraq (145 billion barrels) and Russia (107.
8 billion barrels).

The regional distribution of crude oil production and reserves is generally the same, but the proportion of production in Central and South America is far less than its reserves, accounting for only 7%
of production.
In 2020, global crude oil production was 88.
391 million barrels per day, a decrease of 6.
92% month-on-month due to the impact of the new crown pneumonia epidemic, and an average annual growth rate of 0.
61%
in the past 10 years.
Among them, the United States crude oil production of 16.
476 million barrels per day ranked first, followed by Saudi Arabia, Russia and Canada
.
In 2020, China's crude oil production was 3.
901 million barrels per day, ranking sixth
.
From the perspective of production changes in various regions, the North American shale oil revolution has brought a large increase in local production, and from 2010 to 2019, the average annual production growth rate in North America was 8.
43%; The output growth rate in the Middle East has slowed down in the past two years, with an average annual growth rate of 1.
96%; The output of the CIS also showed a moderate growth trend, with an average annual growth rate of 1.
07%.

In addition, production in Europe, Central and South America, and Africa showed a slow decreasing trend, with production falling by 2.
23%, 1.
80% and 1.
93%
respectively from 2010 to 2019.

According to the reserve-production ratio, Venezuela has huge crude oil resource reserves, but in recent years, affected by US sanctions, Venezuela's crude oil production has shrunk sharply, and its reserve-production ratio in 2020 is as high as 1542.
1, compared with 11.
4 in the United States, 73.
8 in Saudi Arabia, 27.
7 in Russia and 18.
2
in China.
With the advent of the post-pandemic era, crude oil exploration activities are expected to resume, and the reserve-to-production ratio is expected to decrease
when production recovers.

The chart shows the world's major crude oil producers

Demand: Fuel-based demand plays an important role

From the perspective of demand, global crude oil consumption in 2020 was 88.
477 million barrels per day, down 9.
3% month-on-month and an average annual growth of 0.
2%
in the past 10 years.
In 2008 and 2009, due to the financial crisis, demand declined, and demand grew steadily in other years
.
In terms of subregions, the Asia-Pacific region accounted for the highest proportion of demand, at 38%; This is followed by North America and Europe, accounting for 23.
5% and 14.
5%
respectively.
Emerging countries in the Asia-Pacific region have strong economic growth momentum, and the growth rate of crude oil demand is considerable, with an average annual demand growth rate of 3.
1% from 2010 to 2019; This was followed by the CIS and Africa, with growth rates of 2.
5% and 2.
0% respectively; The growth rate of crude oil demand in North America has slowed down, with an average annual growth rate of only 0.
5% from 2010 to 2019; Crude oil demand in Europe showed negative growth
of 0.
5% per year.
From the perspective of national demand ranking, the US demand in 2020 was 17.
178 million barrels per day, ranking first; The main demanders in Asia are China, India and Japan, with 14.
225 million b/d, 4.
669 million b/d and 3.
268 million b/d respectively, making them the second, third and fifth largest demanders
in the world.
As large crude oil demanders, the United States and China dominate in the absolute amount of crude oil demand, and the gap with other countries has widened significantly
.

The chart shows the world's major crude oil consumers

The chart shows the supply and demand of crude oil in various regions of the world

From the perspective of product structure, the main downstream consumption of crude oil is diesel, accounting for 29%; This is followed by gasoline (24%), ethane and LPG (15%), fuel oil (7%), naphtha (7%), kerosene (5%)
.
It can be seen that fuel-type demand occupies an important position in crude oil demand and is widely used in industrial and transportation fields; Chemical demand is also an important part of
crude oil consumption.
As refineries move towards the integration of deep processing and refining and chemical processing, the characteristics of lightweight refining products are becoming more and more prominent, and the consumption structure of different regions is dominated by lightweight components such as diesel and gasoline
.
The Middle East is rich in oil and gas resources, and LPG and ethane have become important oil and gas products in the Middle East for export or use in local gas chemical projects
.
In addition, the second largest consumer of crude oil in the Middle East is fuel oil, which is mainly used for local power generation needs
.
The largest proportion of products in North America is gasoline, and road transportation in the United States is more developed, driving local gasoline demand
.

Trade: There is an imbalance in regional distribution

Analysis of the global crude oil supply and demand structure can find that there is a significant imbalance in the regional distribution of crude oil resource supply and demand: there is a large demand gap in the Asia-Pacific region and Europe, especially in the Asia-Pacific region, local crude oil resources can not meet the growing consumer demand, in 2020, the gap between supply and demand reached 26.
19 million barrels / day, and the gap between supply and demand in Europe was 9.
209 million barrels / day
.
The Middle East, Africa and the CIS showed a pattern of oversupply, with surpluses of 19.
344 million b/d, 3.
306 million b/d and 9.
347 million b/d
in 2020, respectively.
In contrast, North America and Central and South America are rich in their own resources, and the supply and demand structure of crude oil is relatively balanced, with a slight surplus of 2.
749 million barrels per day and 567,000 barrels per day
, respectively.

The regional structure of the imbalance between global crude oil supply and demand determines the circulation direction of crude oil trade worldwide, and the Middle East, led by Saudi Arabia, is the main crude oil export area, and the Middle East (excluding Saudi Arabia) exported 13.
915 million barrels / day of crude oil in 2020; The United States, as the largest crude oil exporter in 2020, exported 8.
117 million barrels per day; Next is Saudi Arabia, which exports 8.
027 million barrels per day of crude oil; Russian exports amounted to 7.
433 million bpd
.
The Asia-Pacific region has limited crude oil resources and mainly exports refined products, with crude oil exports of 7.
399 million barrels per day
in 2020.

From the perspective of export trends in various regions, the US shale oil revolution has driven local exports to rise sharply, with the average annual growth of US crude oil exports reaching 27.
7% in the past 10 years, similar to Canada, with an average annual export growth of 7.
0%; Exports from the Middle East grew by 1.
6% annually and Asia-Pacific by 1.
9%.

Relatively speaking, Saudi Arabia and Russia's export supply is relatively stable, and the export volume has not changed much
in the past 10 years.

The regions with a large supply-demand gap are the world's major crude oil importers, including China, India and Japan in Asia, as well as Europe and the United States
.
Among them, China, as the country with the largest crude oil import volume, reached 12.
865 million barrels per day of crude oil imports in 2020, accounting for 20% of imports; European imports were 12.
611 million barrels per day, accounting for 19%; Next is the United States, India and Japan
.

As developing countries with rapid economic growth, China and India's crude oil imports have maintained a stable growth trend in the past 10 years, of which China's average annual import growth rate is 11.
9%, and India's is 3.
4%.

European imports show a trend of increasing first and then slowing down, which is closely related
to the local economic growth rate and energy structure transformation.
As the supply of domestic resources in the United States continues to be sufficient, its exports continue to rise and imports also decline, and the average annual import growth rate of the United States in the past 10 years is -3.
3%.

Affected by the decline in economic growth, Japan's crude oil imports also showed a downward trend, with an average annual growth rate of -2.
8%.

The picture shows the world's main crude oil export areas

Oil prices: There are downside expectations in the operating hub this year

In 2021, the global crude oil market showed a pattern
of short supply.
From the supply side, OPEC+ strictly implements the production reduction agreement, and the United States is affected by capital expenditure restrictions and natural disasters such as hurricanes, and shale oil production growth is slow
.
From the demand side, with the increasing vaccination rate in the post-epidemic era, the economic impact of the new crown pneumonia epidemic is weakening, and crude oil demand is gradually recovering
.
According to EIA crude oil supply and demand data, the total supply of the global crude oil market in 2021 was 95.
59 million barrels per day, the total demand was 96.
9 million barrels per day, and the gap between supply and demand reached 1.
31 million barrels per day
.
Looking ahead to 2022, the gap between global crude oil supply and demand will narrow and turn to easing
as OPEC production increases and US production gradually recovers, as well as demand growth slows.
According to EIA's forecast of the global crude oil supply and demand balance, crude oil production is expected to increase to 100.
93 million barrels per day in 2022, demand is expected to increase to 100.
46 million barrels per day, and the global crude oil oversupply in 2022 will reach about 4.
7 million barrels per day
.
In 2022, under the condition of increasing inflationary pressure, the Fed's actions to reduce the balance sheet and raise interest rates will continue to tighten liquidity, and the crude oil financial premium will fall, coupled with the expectation of marginal weakening of crude oil fundamentals, there are downward expectations
in the oil price operation center in 2022.

From a medium- and long-term perspective, under the background of "carbon neutrality", the demand for primary energy will continue to decrease, and the realization of clean replacement of new energy and new business is the general direction
of future energy development.
The energy structure of the supply side and the demand side will be adjusted, the capital side will enter the new energy track more, the upstream investment will decline sharply, large oil and gas companies will begin to lay out new energy strategies, sell traditional energy assets, and the long-term crude oil supply will develop
towards a trend of reduction.
Under the net-zero emission standards of various countries, global crude oil demand may fall to 60 million to 75 million barrels per day in 2025, a decline of 25% to 40%, but in the short term, demand replacement still needs a period of time to materialize, if the supply side is reduced too quickly, there may be a phased supply-demand imbalance in the short term
.

The figure shows EIA's global crude oil supply and demand balance forecast