The Organization of Petroleum Exporting Countries (OPEC) has forecasted a daily crude oil demand increase by 5.9 million barrels per day this year from 90.0 million barrels per day year-on-year in 2020 to an average of 95.9 million barrels per day year-on-year in 2021.
The ravaging effects of the COVID-19 pandemic negatively impacted on major economies in both the Organization for Economic Co-operation and Development (OECD) and non-OECD in 2020. OECD America, led by US, was revised lower particularly in the second half of 2020 amid a sluggish recovery in transportation fuels.
However, not the same was recorded for non-OECD countries. Non-OECD oil demand growth was revised higher to reflect a better-than-anticipated demand in China and India.
According to its January 2021 report, this upward revision follows from the discovery of COVID-19 vaccines and the ramping up of economic activities in China. Compared with forecasts made by OPEC in December, 2020, the 2021 report highlights that growth forecast has been kept unchanged for this year.
Notably, oil consumption in the Organization for Economic Co-operation and Development (OECD) is estimated to increase by 2.6 million barrels per day year-on-year but will still lag pre-pandemic levels.
OECD Americas is estimated to increase the most amid a rebound in transportation fuels. Also, in the non-OECD region, oil demand is estimated to increase by 3.3 million barrels per day y-on-y, driven by China followed by India and Other Asia.
On the supply side, the non-OPEC supply is forecasted to grow by 0.8 million barrels per day. This is an upward revision from last month’s figures which registered a decline by 0.08 million barrels per day, month-on-month.
In 2021, the upward revision in non-OPEC oil production will feature due to the increase in US supply, which will offset the downward revision in the supply forecast for Russia. As market conditions improve for US shale, oil prices will move into a range where output is likely to recover at a higher-than-expected rate in the second half of 2021.
The Secretary-General of the Cartel, Dr. Sanusi Barkindo remarked that “After the unprecedented shock experienced last year, the economic forecast calls for brighter days ahead. Our analysts expect the global economy to grow by 4.4 percent in 2021 compared to a sharp contraction of around 4.2 percent last year.
“The COVID-19 vaccinations provide upside potential for the economic outlook and may help usher in a strong rebound in the second half of 2021. Furthermore, we continue to see upward momentum in Asia, especially China,” he added.
According to him, these projections are a move in the right direction, but there is a big gap separating this outlook from the secretariat’s pre-pandemic forecast. “Before the current crisis, at around this time last year, we expected demand reaching 102 million b/d in 2021 – 6 million b/d more than the current projections,” he stressed.
“I am, however, encouraged by the positive momentum in the energy commodity markets, with crude oil prices up by around $7 per barrel or 17 percent since our last meeting,” Barkindo said.
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