For yet another month, OPEC revised down its expectations for global oil demand as the renewed spike in coronavirus cases in major economies is slowing down the oil demand recovery.
In its closely watched Monthly Oil Market Report (MOMR), the cartel cut on Wednesday its global oil demand forecast for this year by 300,000 barrels per day (bpd) compared to last month's estimate and now sees global oil demand at slightly above 90.0 million bpd this year, down by 9.8 million bpd compared to 2019. The main reasons for the expected even lower demand for this year are the recent new lockdowns and curfews in many major European economies, including the UK, France, Germany, and Italy, as well as weaker-than-expected demand in the developed economies in the Americas in the third quarter of 2020.
The weaker oil demand recovery is expected to continue into 2021, according to OPEC, which cut its estimate for global oil demand next year, too. In 2021, oil demand is expected to grow by 6.2 million bpd compared to 2020. This is a downward revision of 300,000 bpd compared to OPEC's October forecast. Next year, total global demand is expected to reach 96.3 million bpd, still lower than the demand before the pandemic. Related: Shell's Largest Refinery Reduces Crude Processing Capacity By 50%
"These downward revisions mainly take into account downward adjustments to the economic outlook in OECD economies due to COVID-19 containment measures, with the accompanying adverse impacts on transportation and industrial fuel demand through mid-2021," OPEC said.
"The oil demand recovery will be severely hampered and sluggishness in transportation and industrial fuel demand is now assumed to last until mid-2021," the cartel added.
OPEC's assessment that the second COVID-19 wave is hitting oil demand more than previously thought comes weeks before the cartel and its Russia-led partners meet on November 30 and December 1 to discuss the state of the oil market and how to proceed with the ongoing record production cuts.
OPEC's new downward revision of its oil demand forecasts-the fifth consecutive this year-is giving the market all the more reasons to speculate that the OPEC+ group needs to roll over the 7.7-million-bpd cut into 2021, instead of easing it by 2 million bpd from January.
By Tsvetana Paraskova for Oilprice.com
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Comments
A few weeks ago OPEC was saying the worst in the global oil market is behind us. Today it is talking about a weaker oil demand as reflected by downgrading its oil demand forecast by 300,000 barrels a day (b/d). The strange thing is that nothing has changed in the market since its previous optimism and now to justify a downgrade.
I suspect that is no more than a ploy to pressure members of OPEC who are against an extension of the OPEC+ current production cuts of 7.7 million barrels a day (mbd) beyond January 2021 rather than easing them by 2 mbd as was the original plan.
Good days for oil are already on the way. Optimism that at last an effective anti-COVID vaccine is available and waiting massive production, the election of Joe Biden with possible de-escalation of tension with Iran and a possible end of the trade war with China and the continuous decline in global crude oil inventories as Vitol, the world’s largest independent oil trader confirmed all support a strengthening of the global oil demand
As a result, crude oil prices are expected to hit $45-$50 a barrel before the end of this year and touch $60 in early 2021. Furthermore, global oil demand will end 2020 at 96 million barrels a day (mbd), a mere 5 mbd short of 2019 level.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London