LONDON- Global oil demand will rebound more slowly in 2021 than previously thought because of the lingering impact of the coronavirus pandemic, OPEC said, hampering efforts by the group and its allies to support the market.
Demand will rise by 5.90 million barrels per day (bpd) next year to 95.89 million bpd, the Organization of the Petroleum Exporting Countries said in a monthly report. The growth forecast is 350,000 bpd less than expected a month ago.
The prospect of a weaker demand recovery has already prompted OPEC and its allies, a group known as OPEC+, to slow the pace of its scheduled oil-output boost in 2021. An OPEC+ panel gathers on Wednesday to review the market.
Oil has rallied above $50 a barrel, its highest since March, supported by hopes that a rollout of vaccines will lift demand, despite major European countries remaining in lockdown mode. Germany is imposing stricter measures from Wednesday.
Oil prices dipped in early trade yesterday, with demand worries due to tighter lockdowns in Europe outweighing relief from vaccination rollouts and concerns about a flare-up of tension in the Middle East.
US West Texas Intermediate (WTI) crude futures fell 16 cents, or 0.3 percent, to $46.83 a barrel, while Brent crude futures fell 20 cents, or 0.4 percent, to $50.09 a barrel, erasing half of Monday’s gains.
London stepped up restrictions requiring bars and restaurants to close, as COVID-19 infection rates continued to rise sharply, which will dent fuel demand in the near term.
Further marring the demand outlook, Italy said it was considering more stringent restrictions over the Christmas holidays, while most stores in Germany have been ordered to shut until Jan. 10, with little prospect of an easing early in the new year.
However vaccination rollouts in the United States, Britain and Canada, which spurred a sharp rally in oil prices last week, continue to keep Brent above $50.
OPEC said that, while fourth-quarter growth was forecast to slow as lockdowns are re-implemented and it was possible some of these measures may be extended into 2021, vaccine developments had brightened the economic outlook.
“While the 2021 forecast remains at 4.4 percent, recent positive news about faster-than-anticipated vaccination programs in major economies provides potential upside for next year’s growth forecast,” OPEC said in the report.
The group has lowered its 2021 demand growth forecast from an initial 7 million bpd in July. OPEC also in the report left its estimate of this year’s historic contraction in oil use steady at 9.77 million bpd.
The report showed rising output too, another headwind for OPEC+, despite continued strong OPEC compliance with pledged supply curbs made this year as the pandemic hit demand.