The International Energy Agency (IEA) cut its demand forecast for oil for the rest of 2021 as Covid-19 infections rise due to the more virulent Delta strain, which may lead to renewed lockdowns in certain parts of the world and affect energy consumption.
The demand for the second half of the year has been lowered by more than 500,000 barrels per day from last month's projection.
Global oil demand is now expected to rise 5.3 million barrels per day on average to 96.2 million bpd in 2021, and a further 3.2 million bpd in 2022, the Paris-based agency said on Thursday.
“Growth for the second half of 2021 has been downgraded more sharply, as new Covid-19 restrictions imposed in several major oil-consuming countries, particularly in Asia, look set to reduce mobility and oil use,” the IEA said.
Covid-19 infections have increased in various countries including Indonesia, Russia, Mexico and parts of Europe. China, one of the top oil consumers in the world, shut one of its busiest ports on Wednesday after a worker became infected with Covid-19, while India – another major crude consumer – is just gradually emerging from a severe second wave of Covid-19 infections.
Australia, which was largely successful in curbing the pandemic, announced a one-week lockdown in the capital Canberra from Thursday.
The IEA report said a new Opec+ deal struck last month will go a long way to restore market balance but the “immediate boost from Opec+ is colliding with slower demand growth and higher output from outside the alliance, stamping out lingering suggestions of a near-term supply crunch or super cycle”.
Brent futures fell from a high of $76.40 per barrel in early July to around $71 per barrel on Thursday due to a surge in Covid-19 cases.
Opec+, the group headed by Saudi Arabia and Russia, is bringing 400,000 barrels per day of supply back to markets in August. The group is planning to phase out a 5.4 million bpd supply restriction pact on the basis of growing demand for crude.
In July, producers boosted output by 1.7 million bpd, as Saudi Arabia ended voluntary curbs and the North Sea bounced back from maintenance, the IEA said.
Separately, Opec on Thursday left its oil demand forecast for 2021 unchanged from last month’s assessment as it expected global economic recovery to gain pace amid widespread vaccine campaigns despite challenges.
Oil demand is expected to grow at 6 million barrels per day with total consumption expected to hit 96.6 million bpd, the group said in its monthly oil market report on Thursday.
“World oil demand growth in 2021 remains unchanged from last month’s report. This is despite the upward revision to GDP growth, as the rising economic recovery is projected to take place mainly in non-oil-intensive sector,” Opec said.
In the Organisation for Economic Co-operation and Development (OECD) region, oil demand is expected to increase by 2.6 million bpd to reach 44.6 million bpd, while in non-OECD, oil demand is expected to increase by 3.4 million barrels per day to reach 51.9 million bpd.
Opec expects global economy to expand by 5.6 per cent in 2021 and 4.2 per cent in 2022, despite uncertainties related to the pandemic and the pace of the vaccine rollout worldwide.