The Organization of the Petroleum Exporting Countries (OPEC) said on Tuesday that world oil demand will recover more slowly in 2021 than previously thought as coronavirus cases increase, adding to headwinds faced by the group and its allies in balancing the market.
In a monthly report, OPEC said demand will rise by 6.54 million barrels per day(bpd) next year to 96.84 million bpd. The growth forecast is 80,000 bpd less than expected a month ago.
Theoilbloc reported in September that OPEC had cut its outlook for world oil demand growth in 2020 and 2021. Oil demand was to decline by 9.5 million barrels per day, resulting in overall demand of 90.2m bpd this year.
A further weakening of demand could threaten plans by OPEC and allies to taper in 2021 the record oil output cuts they made this year. OPEC is keeping an eye on the situation but currently has no plan to cancel the supply boost.
United Arab Emirates Energy Minister Suhail al-Mazrouei told the Energy Intelligence Forum on Tuesday that “We believe that this is the calculated volume to cater for the demand coming back,” referring to the 2021 output increase.
Oil prices have collapsed as the coronavirus crisis curtailed travel and economic activity. While in the third quarter an easing of lockdowns allowed demand to recover, OPEC sees the pace of economic improvement slowing again.
OPEC’s report said of the economic outlook “While the 3Q20 recovery in some economies was impressive, the near-term trend remains fragile, amid a variety of ongoing uncertainties, especially the near-term trajectory of COVID-19,”.
“As this uncertainty looms large, amid globally strong rise in infections, it is not expected that the considerable recovery in 3Q20 will continue into 4Q20 and in 2021.”
OPEC has steadily lowered its 2021 oil demand growth forecast from an initial 7 million bpd expected in July.
The group also cut its estimate of world oil demand in the current quarter by 220,000 bpd. It left its estimate of the scale of this year’s historic contraction in oil use steady at 9.47 million bpd.
OPEC in the report said its production declined by 50,000 bpd to24.11 million bpd in September. That amounted to 104% compliance with the supply cut pledges, according to a Reuters calculation – up from August’s figure of 103%.
Demand for its crude will be 200,000 bpd lower than expected next year at 27.93 million bpd, OPEC also forecast.
Assuming global demand rebounds as expected, this, in theory, leaves room for OPEC members to increase output in 2021 by over 3.8 million bpd from September’s rate without causing a glut.