The renewed lockdowns in major European economies are set to weigh on the oil demand outlook, Keisuke Sadamori, Director of the Office for Energy Markets and Security at the International Energy Agency (IEA), told Reuters in an interview published on Monday.
“Major parts of the European continent are in lockdown. This would surely work toward the negative side,” Sadamori told Reuters, but didn’t elaborate whether the IEA would reduce its outlook in its monthly oil market report expected this Thursday.
In the latest report in October, the IEA left its 2020 forecast for global oil demand unchanged at 91.7 million barrels per day (bpd), down by 8.4 million bpd from 2019. For 2021, the agency expected in October oil demand at 97.2 million bpd, which would be a gain of 5.5 million bpd from 2020.
The international agency cited in its October report the uncertainty about the pace of economic and oil demand recovery in a second COVID-19 wave, warning that “those wishing to bring about a tighter oil market are looking at a moving target.”
The IEA now expects demand to take a hit from the new lockdowns in Europe, especially in major economies such as France, Germany, and the UK. However, the impact on demand will be smaller than in the spring, when the previous near-simultaneous lockdowns not only in Europe, but also in the United States, crushed global oil demand by 20 million bpd in April.
“We certainly expect this time for there to be a lower impact than the last lockdown,” Sadamori told Reuters, noting that schools remain open in Europe now, unlike in the lockdowns in the second quarter.
The only bright spot on the market is China, which is set to be the only major economy to see annual growth in oil demand, Sadamori told Reuters.
China’s oil imports, however, are falling from record highs. According to data from analytics provider OilX, Chinese crude oil imports dropped by 4.88 percent in October compared to September. At 10.96 million bpd, imports were more than 560,000 bpd lower than the average for September, but they were higher than in September 2019 by 3.47 percent or 367,000 bpd.
By Tsvetana Paraskova for Oilprice.com
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The news that a vaccine developed jointly by the American pharmaceutical company Pfizer and the German company BioNTech can prevent 90% of people from getting COVID-19 is a hugely welcome development. It will give a huge glimmer of hope to a market bereft of good news.
If this vaccine becomes available before the end of the year, it will act as a huge impetus to the global economy, oil demand and prices. A case in point is that the mere announcement about the success of the vaccine sent the Brent oil price surging from under $40 a barrel early this morning to $42.80. Add to this the China rebound factor and the markets will be headed upwards.
Moreover, it will be of particularly huge benefit for the US economy where the pandemic has been wreaking havoc and where the economy has shrunk by 32.9% in the second quarter of 2020.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London