The Organization of the Petroleum Exporting Countries (OPEC), has said that world oil demand for 2021 is forecasted to grow despite COVID-19 uncertainties.
According to OPEC’s monthly report, world oil demand growth in 2021 is foreseen increasing by around 7.0 million of barrels per day (mb/d) with global total oil demand reaching 97.6 mb/d. The forecast assumes that COVID-19 will largely be contained globally with no major disruptions to the global economy.
The report is also projecting economic activities to rebound steadily in both advanced and emerging economies. According to the report, the outlook assumes an increase of 4.7% in economic activities next year but uncertainties around the labour market as well as increased usage of teleworking and distance conferencing is assumed to hinder transportation fuels from bouncing back to pre-crisis levels.
Moving on to 2020 world demand , the report said world oil demand in 2020 is estimated to decrease by 9.1 mb/d than the previous forecast of an 8.95 million bpd decline expected a month ago due to the coronavirus pandemic.
Oil prices have collapsed as the coronavirus curtailed travel and economic activity. While some countries have eased lockdowns, allowing demand to recover, fear of new outbreaks has kept a lid on prices and OPEC expects this to persist.
“Crude and product price developments in the second half 2020 will continue to be impacted by concerns over a second wave of infections and higher global stocks.”
“Gasoline demand will face pressure to return to 2019 levels.”
OPEC in the report said inventories in developed nations rose in June to stand 291.2 million barrels above the five-year average. Oil stocks are also said to have built up due to the demand collapse.
Light distillates and diesel are projected to gain support from improving economic momentum, including infrastructure spending and improving industrial activities, as well as capacity additions in the petrochemical sector, particularly in China and the US.
All products are assumed to grow although it reached very low levels in 2020. On the other hand, the report says persistence in fuel efficiency gains, a continuation of oil displacement programmes and subsidy removals will cap oil demand growth next year.
Touching on world supply, the report said that, preliminary data indicates that global oil supply increased in July by 1.29 mb/d to average 88.75 mb/d, down by 9.98 mb/d. It said Global supplies are rising, but not as much as demand, based on the recent update.
Non-OPEC liquids production in 2021 is expected to grow by 0.98 mb/d to average 63.10 mb/d including a recovery of 0.13 mb/d in processing gains after it was revised up by 66 mb/d. The main drivers for supply growth are expected to be the US, Canada, Brazil and Norway, whereby the majority of this increase represents a recovery of production from 2020 rather than new projects.
Notwithstanding, uncertainty regarding financial and logistical aspects of US production, as well as a likelihood of a second wave of COVID-19 infections globally, remains high.
