IEA lowered its forecast for oil demand for 2021
The International Energy Agency (IEA) on Tuesday lowered its forecast for global oil demand for 2021, citing a sharp increase in the number of Covid-19 cases and renewed isolation measures that will further restrict mobility.
The IEA said it now expects global oil demand to recover by 5.5 million barrels per day to 96.6 million this year. This is a downward revision of the forecast by 0.3 million barrels from last month‘s estimate and follows an unprecedented decline in the forecast. 8.8 million barrels a day last year when the coronavirus pandemic hit global oil markets.
The IEA’s latest oil market report comes as countries continue to apply stringent public health controls in an effort to curb the virus‘s spread with quarantines in Europe and parts of China..
The Paris-based energy agency said growth in oil demand is projected to moderate slightly in the first three months of the year due to tighter government isolation plans that will cause additional travel restrictions..
This is expected to reduce global mobility again, prompting the IEA to lower its forecast for first-quarter oil demand growth to 94.1 million barrels per day. This will bring oil demand back to levels close to a year ago and reflects a downward revision of 0.6 million barrels from the December oil market report..
«Global vaccine rollout puts fundamentals on a stronger trajectory for the year, with both supply and demand returning to growth mode following an unprecedented 2020 collapse», – according to the IEA report.
«But it will take longer for oil demand to recover fully, as renewed restrictions in a number of countries negatively affect fuel sales.», – follows from the report.
Oil prices have risen in recent weeks, fueled by optimism over coronavirus vaccine rollout and unexpected cutback in oil production by OPEC king Saudi Arabia.
However, the relatively slow pace of vaccinations raises doubts about how soon the economy can recover..
Brent crude futures internationally traded at $ 55.26 a barrel on Tuesday morning, up more than 0.9%, while US West Texas Intermediate (WTI) crude oil futures stood at $ 52.51, roughly 0.3% higher.
Both were down more than 2.2% in the previous session, hitting their worst daily since Dec 21.
OPEC and its non-member allies, the alliance sometimes referred to as OPEC +, slashed oil production by a record amount in 2020 in an attempt to prop up oil prices as stringent global public health controls coincided with a fuel demand shock.
OPEC + initially agreed to cut production by 9.7 million barrels per day, then cut the cut up to 7.7 million, but in ultimately, the decline was 7.2 million from January. De facto OPEC leader Saudi Arabia said it plans to cut production by an additional 1 million barrels per day in February and March to prevent stockpiling.
The IEA reports that the commercial stocks of oil and oil products in OECD countries in November fell for the fourth month in a row – by 23.6 million barrels (0.79 million barrels per day), to 3.108 billion barrels. Stocks peaked in July (3.221 trillion barrels) and declined by an average of 0.93 million barrels per day during November and even more by 1.44 million bpd in December (according to preliminary data from the US, Japan and Europe).
Preliminary data shows that in December 2020, US oil inventories fell by 7.9 million barrels per month due to the seasonal trend. The total inventories of petroleum products in the United States decreased by 12 million barrels.
OPEC last week unchanged its forecast for global oil demand for 2021. The 13-member group expected demand growth to rise by 5.9 million barrels per day over last year, averaging up to 95.9 million barrels.