Global oil demand is set to rise by 5.9 million barrels per day (bpd) in 2021 from an estimated average demand of 90 million bpd in 2020, OPEC said on Thursday, leaving its 2021 demand growth forecast unchanged from last month but warning that the pandemic is still skewing risks to the downside.
Developed economies will see oil demand rise by 2.6 million bpd this year, driven by North America, while emerging markets—led by China and India—will see oil demand increase by 3.3 million bpd, OPEC said in its Monthly Oil Market Report (MOMR).
In total, world oil demand is expected to average 95.9 million bpd in 2021—still nearly 5 million bpd below the pre-crisis levels from 2019.
“Oil demand is not projected to fully recover from the 2020 slump,” said OPEC, which estimates 2020 demand to have crashed by 9.8 million bpd to average 90 million bpd.
In the mature economies in North America and Europe, the forecasts for oil demand are still heavily dependent on how the countries will recover their economies and go out of current lockdowns, the cartel noted.
For North America, “The recovery in transportation fuels, including gasoline, is additionally linked to developments in the labour market and gasoline retail prices. The current outlook assumes a respectable recovery in both variables,” OPEC said.
In Europe, “Uncertainties remain high going forward with the main downside risks being issues related to COVID-19 containment measures and the impact of the pandemic on consumer behaviour. These will also include how many countries are adapting lockdown measures, and for how long.”
OPEC sees China, the world’s largest oil importer, to continue to see solid growth in all economic sectors.
On the supply side, OPEC’s secondary sources estimate the cartel’s crude oil production at 25.36 million bpd in December, up by 280,000 bpd from November.
Production in Libya soared by 136,000 bpd to an average of 1.224 million bpd last month. Iraq and the United Arab Emirates (UAE) also raised their production, while Saudi Arabia’s output held steady at 8.964 million bpd.
By Tsvetana Paraskova for Oilprice.com
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An added bullish factor is China’s and India’s insatiable thirst for oil. China’s crude oil imports broke all previous records and were 10% higher in 2020 than 2019 despite the pandemic. China’s economic growth is projected to hit 8% this year according to the International Monetary Fund (IMF). That is why China’s crude oil imports will continue to break records in 2021.
India has managed to restore its oil demand to 2019 level in September 2020 despite the impact of the pandemic. The IMF is projecting that India’s economy will grow at 8.3% in 2021 signifying that its crude oil imports will also break previous records.
Based on the above, Brent crude price could be expected to hit $60 a barrel in the first quarter of 2021 rising to $70-$80 in the third quarter and averaging $60-$65 in 2021.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London