Market environment in 2021

Despite the coronavirus pandemic, the US remains the world’s largest crude oil consumer. In 2021, the demand for crude among the top three consumers (the US, China, Europe) increased the most in the US (by 8.4% year on year). In the US, a significant portion of crude processed is sourced from domestic reserves (mainly unconventional shale deposits).

The key drivers of the demand for oil and gas include:

• climate protection measures – in July 2021, the European Commission published a legislative package called Fit for 55, which aims at accelerating economic transition to achieve the EU’s climate neutrality. The demand for crude oil is in particular affected by the proposed obligatory minimum share of sustainable fuels in supplies of, for instance, aviation fuels. In addition, it was proposed to change the emission limits for vehicles, with a 55% reduction in greenhouse gas emissions by 2030 vs the 1990 levels and a long-term transition to zero net emissions by 2050. The high and steadily rising price of CO2 emission allowances is stimulating a shift in the energy mix towards an increased share of renewables;
• economic growth rate – the opening of global economies after periods of strict lockdown measures and travel restrictions contributed to the return global GDP to the path of growth relative to previous years, especially 2020. The International Monetary Fund predicts that economic activity should rebound in 2022, with global GDP growth reaching 4.4% (compared with 5.9% in 2021) – although this forecast seems highly uncertain due to the outbreak of war in Ukraine;
  • logistics and transport – during the year, the sector experienced difficulties. The most acute were port congestion, shortage of labour and sudden increase in demand for products;
  • changes in the population preferences – as a result of the continuing COVID-19 pandemic, the trend was observed over the year to use private cars rather than public transport. Moreover, the continuing limited number of commercial flights contributed to the increased use of private means of transport means;
  • technology advances – in addition to the use of new alternative fuels, innovations are being introduced to reduce fuel consumption by traditional propulsion systems, e.g. by improving the efficiency of automotive engines, reducing the weight of commercial vehicles, recovering power during braking, or streamlining vehicle bodies. Technology advances have also an effect on the cost and efficiency of such solutions

Source: In-house analysis based on IMF data (estimates)

Source: In-house analysis based on Polish Organisation of Oil Industry and Trade (POPiHN) data.

In 2021, the OPEC+ agreement was still in force, but was heavily modified in the wake of the COVID-19 outbreak. The member countries responded to changes in the environment, in particular Saudi Arabia, which in February voluntarily reduced the crude supply by 1 million b/d. However, the organization’s strong expectation for the demand increase in the coming months brought about a regular monthly increase in the supply of crude oil by several hundred thousand barrels a day. The US sanctions imposed on Iran remained in force, which limited the availability of heavy and sour crude oil grades. In 2021, the supply of crude oil from the US was reduced twice owing to the forces of nature. Both reductions took place on the US south coast. In late February and early March, freezing temperatures caused temporary shortages in electricity supply, resulting in the region cutting its output by 4 million b/d. Subsequently, in August, the hurricane Ida caused a temporary fall in crude oil production to 1.74 million b/d, or 17% of total US production in that period. The rapid increase in crude oil demand over the year drove up the crude prices to the multi-year highs, leading to spikes in inflation and fuel prices. In order to counteract these economic adversities, the world’s largest oil importers decided to release part of the strategic oil stocks on local markets.

In 2021, global crude oil production grew from 93.9 million b/d to 95.53 million b/d, with all major producers increasing their crude supply year on year. The United States remained the largest producer despite the continuing COVID-19 pandemic. However, the increase in US production was relatively slow (+240 thousand b/d compared with 2020), which resulted from stabilisation of financial results after significant losses reported in the previous year and very limited investments in restoring output volumes. As a result, net imports of crude oil to the US increased by 520 thousand b/d year on year. Other key suppliers of crude oil to the international market include Russia (10.78 million b/d), Saudi Arabia (9.11 million b/d), Canada (5.58 million b/d) and Iraq (4.06 million b/d).

At the beginning of 2021, a total of 87 oil fields were documented in Poland, including in the Carpathian mountains – 29 fields, in the Carpathian foreland – 12 fields, in the Polish Lowlands – 44 fields, and in the Polish economic zone of the Baltic Sea – 2 fields. The Carpathian oil fields are nearing depletion, while in the other areas production and enhanced oil recovery measures are continuing. Crude oil and condensate production from all fields was 911.4 thousand tonnes, a decrease of 25.3 thousand tonnes year on year. Domestic reserves cover only 3% of the total domestic demand for crude oil.

In 2021, crude oil continued to be supplied to Polish refineries (due to their geographical location, oil availability, existing supply infrastructure, and the types of units operated by the refineries) mainly from Russia. Poland also received crude oil supplies from Saudi Arabia, Nigeria, Kazakhstan, Norway and the UK.