In the latest closely watched OPEC Monthly Oil Market report published this morning, the oil-exporting cartel cut estimates for the amount of crude it will need to provide in 2021 as a return of covid lockdowns is expected to hit fuel use.
The virus’s effects will “linger” next year even with the announcement of a vaccine breakthrough, OPEC said:
“Risks remain with regard to oil demand going forward. Ongoing developments in the COVID-19 pandemic will continue to dominate a recovery amid the latest news relating to a potential imminent vaccine. The structural impact of the pandemic on various sectors, especially the transportation sector, will linger well into 2021. Also, developments in labor markets, potential new policies governing the energy sector, as well as the effectiveness of the large scale monetary and fiscal stimulus measures will determine the strength of the rebound in economic activities in the year to come.”
The revision illustrates why the group’s effective leader, Saudi Arabia, said that OPEC+ (including Russia) may adjust plans to restore supply when they meet later this month, especially if a Biden administration is seen as easing Iran’s oil export embargo which could bring an additional 1 million barrels to market.
Specifically, according to OPEC:
- Total global oil demand is now seen at slightly above 90.0mln BPD, a drop of 300kb/d from 90.3mln perviously
- 2020 world oil demand is now expected to contract by around 8mln BPD y/y, up from -9.5mln previously.
- 2021 World oil demand is now expected to grow by around 6.2mln BPD y/y, also a slower increase compared to the +6.5mln previously.